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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of ~~January 31,~~July 25, 2019, the registrant had ~~57,275,218~~57,844,302 shares of common stock outstanding. The shares of common stock trade on the New York Stock Exchange under the ticker symbol “WMS.” In addition, as of ~~January 31,~~July 25, 2019, ~~249,897~~304,099 shares of unvested restricted common stock were outstanding and ~~22,701,617~~22,383,938 shares of ESOP, preferred stock, convertible into ~~17,462,083~~17,217,725 shares of common stock, were outstanding. As of ~~January 31,~~July 25, 2019, ~~74,987,198~~75,366,126 shares of common stock were outstanding, inclusive of outstanding shares of unvested restricted common stock and on an as-converted basis with respect to the outstanding shares of ESOP preferred stock.

	December 31, 2018			March 31, 2018			June 30, 2019				March 31, 2019
ASSETS
Current assets:
Cash	$	19,758		$	17,587		$	9,357			$	8,891
Receivables (less allowance for doubtful accounts of $7,353 and $6,826, respectively)		152,538			171,961
Receivables (less allowance for doubtful accounts of $5,704 and $7,653, respectively)								231,829				186,991
Inventories		246,451			263,792			230,284				264,540
Other current assets		7,641			5,113			9,185				6,091
Total current assets		426,388			458,453			480,655				466,513
Property, plant and equipment, net		402,819			399,381			396,280				398,891
Other assets:
Goodwill		102,423			103,017			102,844				102,638
Intangible assets, net		38,554			44,437			35,733				37,177
Other assets		36,856			37,954			52,903		��		36,940
Total assets	$	1,007,040		$	1,043,242		$	1,068,415			$	1,042,159
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of debt obligations	$	26,165		$	26,848		$	25,939			$	25,932
Current maturities of capital lease obligations		23,354			22,007
Current maturities of finance lease obligations								22,695				23,117
Accounts payable		66,361			105,521			106,413				93,577
Other accrued liabilities		67,567			60,560			76,267				61,901
Accrued income taxes		6,608			6,307			12,669				1,758
Total current liabilities		190,055			221,243			243,983				206,285
Long-term debt obligations (less unamortized debt issuance costs of $2,467 and $3,028, respectively)		200,764			270,900
Long-term capital lease obligations		63,541			59,963
Long-term debt obligations (less unamortized debt issuance costs of $2,119 and $2,293, respectively)								230,337				208,602
Long-term finance lease obligations								56,368				61,555
Deferred tax liabilities		35,472			32,304			48,745				45,963
Other liabilities		22,220			25,023			28,641				19,119
Total liabilities		512,052			609,433			608,074				541,524
Commitments and contingencies (see Note 10)
Commitments and contingencies (see Note 11)
Mezzanine equity:
Redeemable convertible preferred stock: $0.01 par value; 47,070 shares authorized; 44,170 shares issued; 22,810 and 23,300 shares outstanding, respectively		285,117			291,247
Redeemable convertible preferred stock: $0.01 par value; 47,070 shares authorized; 44,170 shares issued; 22,385 and 22,611 shares outstanding, respectively								279,816				282,638
Deferred compensation – unearned ESOP shares		(182,980	)		(190,168	)		(31,659	)			(180,316	)
Redeemable noncontrolling interest in subsidiaries		—			8,471
Total mezzanine equity		102,137			109,550			248,157				102,322
Stockholders’ equity:
Common stock; $0.01 par value: 1,000,000 shares authorized; 57,634 shares issued; 57,190 and 56,476 shares outstanding, respectively		11,433			11,426
Common stock; $0.01 par value: 1,000,000 shares authorized; 58,283 and 57,964 shares issued, respectively; 57,779 and 57,490 shares outstanding, respectively								11,439				11,436
Paid-in capital		383,300			364,908			501,046				391,039
Common stock in treasury, at cost		(9,117	)		(8,277	)		(10,162	)			(9,863	)
Accumulated other comprehensive loss		(27,675	)		(21,247	)		(24,470	)			(25,867	)
Retained earnings (deficit)		22,017			(39,214	)
Retained (deficit) earnings								(278,727	)			17,582
Total ADS stockholders’ equity		379,958			307,596			199,126				384,327
Noncontrolling interest in subsidiaries		12,893			16,663			13,058				13,986
Total stockholders’ equity		392,851			324,259			212,184				398,313
Total liabilities, mezzanine equity and stockholders’ equity	$	1,007,040		$	1,043,242		$	1,068,415			$	1,042,159

	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended June 30,
	2018			2017			2018			2017			2019			2018
Net sales	$	318,113		$	320,832		$	1,112,515		$	1,080,240		$	413,708		$	387,847
Cost of goods sold		245,714			243,006			845,052			825,874			307,256			288,156
Cost of goods sold - ESOP special dividend compensation														168,610			—
Gross profit		72,399			77,826			267,463			254,366			(62,158	)		99,691
Operating expenses:
Selling		23,260			22,903			72,156			70,348			26,365			24,165
General and administrative		22,116			23,788			65,082			74,351			31,433			21,382
Selling, general and administrative - ESOP special dividend compensation														78,142			—
Loss on disposal of assets and costs from exit and disposal activities		144			1,924			1,572			10,468			707			1,104
Intangible amortization		1,976			2,012			5,945			6,071			1,542			1,984
Income from operations		24,903			27,199			122,708			93,128
(Loss) income from operations														(200,347	)		51,056
Other expense:
Interest expense		5,695			3,086			14,028			12,620			5,264			3,802
Derivative loss (gains) and other expense (income), net		634			(963	)		(86	)		(4,456	)
Income before income taxes		18,574			25,076			108,766			84,964
Income tax expense (benefit)		2,490			(7,371	)		28,968			15,812
Derivative gains and other income, net														(96	)		(814	)
(Loss) income before income taxes														(205,515	)		48,068
Income tax expense														22,370			14,284
Equity in net (income) loss of unconsolidated affiliates		(466	)		(768	)		225			(496	)		(434	)		133
Net income		16,550			33,215			79,573			69,648
Less: net income attributable to noncontrolling interest		738			1,110			2,811			1,938
Net income attributable to ADS		15,812			32,105			76,762			67,710
Net (loss) income														(227,451	)		33,651
Less: net (loss) income attributable to noncontrolling interest														(1,095	)		1,371
Net (loss) income attributable to ADS														(226,356	)		32,280
Weighted average common shares outstanding:
Basic		57,180			55,917			56,925			55,497			57,576			56,594
Diluted		57,685			56,459			57,482			56,124			57,576			57,158
Net income per share:
Net (loss) income per share:
Basic	$	0.25		$	0.52		$	1.22		$	1.09		$	(4.06	)	$	0.51
Diluted	$	0.25		$	0.51		$	1.20		$	1.08		$	(4.06	)	$	0.51
Cash dividends declared per share	$	0.08		$	0.07		$	0.24		$	0.21

	Nine Months Ended December 31,						Three Months Ended June 30,
	2018			2017			2019			2018
Cash Flows from Operating Activities
Net income	$	79,573		$	69,648
Adjustments to reconcile net income to net cash provided by operating activities:
Net (loss) income							$	(227,451	)	$	33,651
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		52,912			55,793			16,694			17,827
Deferred income taxes		2,316			(12,738	)		2,191			1,729
Loss on disposal of assets and costs from exit and disposal activities		1,572			10,468			707			1,104
ESOP and stock-based compensation		16,142			13,086			7,425			5,580
ESOP special dividend compensation								246,752			—
Amortization of deferred financing charges		561			746			174			191
Fair market value adjustments to derivatives		1,976			(1,988	)		1,789			(625	)
Equity in net loss (income) of unconsolidated affiliates		225			(496	)
Equity in net (income) loss of unconsolidated affiliates								(434	)		133
Other operating activities		(3,493	)		12,046			(2,880	)		(1,030	)
Changes in working capital:
Receivables		16,768			(14,817	)		(44,494	)		(54,910	)
Inventories		15,705			44,560			34,803			1,040
Prepaid expenses and other current assets		(2,562	)		2,105			(3,089	)		(3,665	)
Accounts payable, accrued expenses, and other liabilities		(33,673	)		(39,504	)		30,653			8,806
Net cash provided by operating activities		148,022			138,909			62,840			9,831
Cash Flows from Investing Activities
Capital expenditures		(31,130	)		(35,124	)		(9,723	)		(6,874	)
Cash paid for acquisitions, net of cash acquired		—			(1,990	)
Proceeds from sale of corporate-owned life insurance		—			5,959
Other investing activities		1,109			(570	)		(13	)		(109	)
Net cash used in investing activities		(30,021	)		(31,725	)		(9,736	)		(6,983	)
Cash Flows from Financing Activities
Proceeds from Revolving Credit Facility		331,600			397,450			137,400			101,400
Payments on Revolving Credit Facility		(376,600	)		(431,950	)		(115,600	)		(93,700	)
Payments on Term Loan		—			(72,500	)
Proceeds from Senior Notes		—			75,000
Payments on Senior Notes		(25,000	)		(25,000	)
Debt issuance costs		—			(2,268	)
Payments of notes, mortgages and other debt		(700	)		(1,675	)		—			(230	)
Payments on capital lease obligations		(17,791	)		(18,176	)
Acquisition of noncontrolling interest in BaySaver		(8,821	)		—
Payments on finance lease obligations								(6,047	)		(5,885	)
Cash dividends paid		(21,084	)		(13,511	)		(69,641	)		(6,141	)
Proceeds from exercise of stock options		3,937			7,606			1,513			3,215
Repurchase of common stock		—			(7,947	)
Other financing activities		(920	)		(1,558	)		(258	)		(257	)
Net cash used in financing activities		(115,379	)		(94,529	)		(52,633	)		(1,598	)
Effect of exchange rate changes on cash		(451	)		(698	)		(5	)		(443	)
Net change in cash		2,171			11,957			466			807
Cash at beginning of period		17,587			6,450			8,891			17,587
Cash at end of period	$	19,758		$	18,407		$	9,357		$	18,394
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes	$	27,459		$	25,408		$	535		$	952
Cash paid for interest		11,506			13,904			3,920			4,000
Non-cash operating, investing and financing activities:
Acquisition of property, plant and equipment under capital lease and incurred lease obligations		19,915			25,993
Acquisition of property, plant and equipment under finance lease and incurred lease obligations								296			3,171
Balance in accounts payable for the acquisition of property, plant and equipment		2,381			998			4,364			1,851
Payable recorded for business acquisition		—			300
Contribution of net accounts receivable to the South American Joint Venture		—			2,785

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY

	Common Stock						Paid -In			Common Stock in Treasury						Accumulated Other Compre-hensive			Retained (Deficit)			Total ADS Stockholders’			Non- controlling Interest in			Total Stock- holders’			Redeemable Convertible Preferred Stock						Deferred Compensation Unearned ESOP Shares						Redeemable Non-controlling Interest in			Total Mezzanine			Common Stock				Paid -In		Common Stock in Treasury					Accumulated Other Compre-hensive			Retained (Deficit)			Total ADS Stockholders’			Non- controlling Interest in			Total Stock- holders’			Redeemable Convertible Preferred Stock						Deferred Compensation Unearned ESOP Shares						Redeemable Non-controlling Interest in			Total Mezzanine
	Shares			Amount			Capital			Shares			Amount			Loss			Earnings			Equity			Subsidiaries			Equity			Shares			Amount			Shares			Amount			Subsidiaries			Equity			Shares		Amount		Capital		Shares		Amount			Loss			Earnings			Equity			Subsidiaries			Equity			Shares			Amount			Shares			Amount			Subsidiaries			Equity
Balance at April 1, 2017		153,560		$	12,393		$	755,787			98,222		$	(436,984	)	$	(24,815	)	$	(83,678	)	$	222,703		$	14,907		$	237,610			24,225		$	302,814			15,863		$	(198,216	)	$	8,227		$	112,825
Balance at April 1, 2018																																																		56,889	$	11,426	$	364,908		413	$	(8,277	)	$	(21,247	)	$	(39,214	)	$	307,596		$	16,663		$	324,259			23,300		$	291,247			15,219		$	(190,168	)	$	8,471		$	109,550
Net income		—			—			—			—			—			—			67,710			67,710			1,165			68,875			—			—			—			—			773			773			—		—		—		—		—			—			32,280			32,280			1,033			33,313			—			—			—			—			338			338
Other comprehensive income		—			—			—			—			—			3,882			—			3,882			(872	)		3,010			—			—			—			—			—			—			—		—		—		—		—			(3,437	)		—			(3,437	)		(1,375	)		(4,812	)		—			—			—			—			—			—
Redeemable convertible preferred stock dividends		—			—			—			—			—			—			(1,310	)		(1,310	)		—			(1,310	)		—			—			—			—			—			—			—		—		—		—		—			—			(497	)		(497	)		—			(497	)		—			—			—			—			—			—
Common stock dividends ($0.21 per share)		—			—			—			—			—			—			(11,729	)		(11,729	)		—			(11,729	)		—			—			—			—			—			—
Common stock dividends ($0.08 per share)																																																		—		—		—		—		—			—			(4,545	)		(4,545	)		—			(4,545	)		—			—			—			—			—			—
Dividend paid to non-controlling interest holder																										(490	)		(490	)																				—		—		—		—		—			—			—			—			(735	)		(735	)		—			—			—			—			(335	)		(335	)
Allocation of ESOP shares to participants for compensation		—			—			1,910			—			—			—			—			1,910			—			1,910			—			—			(483	)		6,036			—			6,036			—		—		1,625		—		—			—			—			1,625			—			1,625			—			—			(192	)		2,396			—			2,396
Exercise of common stock options		559			6			7,558			(2	)		42			—			—			7,606			—			7,606			—			—			—			—			—			—			217		2		3,215		26		(704	)		—			—			2,513			—			2,513			—			—			—			—			—			—
Restricted stock awards		41			—			1,801			(78	)		349			—			—			2,150			—			2,150			—			—			—			—			—			—			19		1		786		2		(52	)		—			—			735			—			735			—			—			—			—			—			—
Reclassification of liability- classified awards		—			—			13,714			—			—			—			—			13,714			—			13,714			—			—			—			—			—			—
Equity classified stock-based compensation expense		—			—			2,991			—			—			—			—			2,991			—			2,991			—			—			—			—			—			—
Stock-based compensation expense																																																		—		—		773		—		—			—			—			773			—			773			—			—			—			—			—			—
ESOP distribution in common stock		192			2			7,775			(394	)		1,753			—			—			9,530			—			9,530			(762	)		(9,530	)		—			—			—			(9,530	)		241		2		3,908		—		—			—			—			3,910			—			3,910			(313	)		(3,910	)		—			—			—			(3,910	)
Retirement of common stock held in treasury		(97,745	)		(977	)		(433,852	)		(97,745	)		434,829									—			—			—
Common stock repurchases		—			—			—			400			(7,947	)		—			—			(7,947	)		—			(7,947	)		—			—			—			—			—			—
Balance at December 31, 2017		56,607		$	11,424		$	357,684			403		$	(7,958	)	$	(20,933	)	$	(29,007	)	$	311,210		$	14,710		$	325,920			23,463		$	293,284			15,380		$	(192,180	)	$	9,000		$	110,104
Balance at April 1, 2018		56,889		$	11,426		$	364,908			413		$	(8,277	)	$	(21,247	)	$	(39,214	)	$	307,596		$	16,663		$	324,259			23,300		$	291,247			15,219		$	(190,168	)	$	8,471		$	109,550
Net income		—			—			—			—			—			—			76,762			76,762			1,979			78,741			—			—			—			—			832			832
Balance at June 30, 2018																																																		57,366	$	11,431	$	375,215		441	$	(9,033	)	$	(24,684	)	$	(11,976	)	$	340,953		$	15,586		$	356,539			22,987		$	287,337			15,027		$	(187,772	)	$	8,474		$	108,039
Balance at April 1, 2019																																																		57,964	$	11,436	$	391,039		474	$	(9,863	)	$	(25,867	)	$	17,582		$	384,327		$	13,986		$	398,313			22,611		$	282,638			14,452		$	(180,316	)	$	—		$	102,322
Net loss																																																		—		—		—		—		—			—			(226,356	)		(226,356	)		(1,095	)		(227,451	)		—			—			—			—			—			—
Other comprehensive loss		—			—			—			—			—			(6,428	)		—			(6,428	)		(1,189	)		(7,617	)		—			—			—			—			—			—			—		—		—		—		—			1,397			—			1,397			167			1,564			—			—			—			—			—			—
Redeemable convertible preferred stock dividends		—			—			—			—			—			—			(1,442	)		(1,442	)		—			(1,442	)		—			—			—			—			—			—			—		—		—		—		—			—			(6,846	)		(6,846	)		—			(6,846	)		—			—			—			—			—			—
Common stock dividends ($0.24 per share)		—			—			—			—			—			—			(13,751	)		(13,751	)		—			(13,751	)		—			—			—			—			—			—
Dividend paid to non-controlling interest holder		—			—			—			—			—			—			—			—			(4,560	)		(4,560	)		—			—			—			—			(1,075	)		(1,075	)
Common stock dividends ($1.09 per share)																																																		—		—		—		—		—			—			(63,107	)		(63,107	)		—			(63,107	)		—			—			—			—			—			—
Allocation of ESOP shares to participants for compensation		—			—			3,925			—			—			—			—			3,925			—			3,925									(575	)		7,188						7,188			—		—		2,490		—		—			—			—			2,490			—			2,490			—			—			(248	)		3,094			—			3,094
ESOP special dividend compensation																																																		—		—		101,189		—		—			—			—			101,189			—			101,189			—			—			(11,645	)		145,563			—			145,563
Exercise of common stock options		277			2			3,937			28			(767	)		—			—			3,173			—			3,173			—			—			—			—			—			—			114		1		1,667		7		(207	)		—			—			1,461			—			1,461			—			—			—			—			—			—
Restricted stock awards		93			1			2,945			3			(73	)		—			—			2,872			—			2,872			—			—			—			—			—			—			31		—		—		3		(92	)		—			—			(92	)		—			(92	)		—			—			—			—			—			—
Equity classified stock-based compensation expense		—			—			2,084			—			—			—			—			2,084			—			2,084			—			—			—			—			—			—
Stock-based compensation expense																																																		—		—		1,841		—		—			—			—			1,841			—			1,841			—			—			—			—			—			—
ESOP distribution in common stock		375			4			6,126			—			—			—			—			6,130			—			6,130			(490	)		(6,130	)		—			—			—			(6,130	)		174		2		2,820		—		—			—			—			2,822			—			2,822			(226	)		(2,822	)		—			—			—			(2,822	)
Acquisition of noncontrolling interest in BaySaver		—			—			(625	)		—			—			—			(338	)		(963	)		—			(963	)														(8,228	)		(8,228	)
Balance at December 31, 2018		57,634		$	11,433		$	383,300			444		$	(9,117	)	$	(27,675	)	$	22,017		$	379,958		$	12,893		$	392,851			22,810		$	285,117			14,644		$	(182,980	)	$	—		$	102,137
Balance at June 30, 2019																																																		58,283	$	11,439	$	501,046		484	$	(10,162	)	$	(24,470	)	$	(278,727	)	$	199,126		$	13,058		$	212,184			22,385		$	279,816			2,559		$	(31,659	)	$	—		$	248,157

Description of Business -Advanced Drainage Systems, Inc. and subsidiaries (collectively referred to as “ADS” or the “Company”), incorporated in Delaware, designs, manufactures and markets high performance thermoplastic corrugated pipe and related water management products, primarily in North and South America and Europe. ADS’s broad product line includes corrugated high density polyethylene (or “HDPE”) pipe, polypropylene (or “PP”) pipe and related water management products.

The Company is managed based primarily on the geographies in which it operates and reports results of operations in two reportable segments: Domestic and International.

Historically, sales of the Company’s products have been higher in the first and second quarters of each fiscal year due to favorable weather and longer daylight conditions accelerating construction activity during these periods. Seasonal variations in operating results may also be impacted by inclement weather conditions, such as cold or wet weather, which can delay projects.

Basis of Presentation -The Company prepares its Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Condensed Consolidated Balance Sheet as of March 31, ~~2018~~2019 was derived from audited financial statements included in the Annual Report on Form 10-K for the year ended March 31, ~~2018~~2019 (“Fiscal ~~2018~~2019 Form 10-K”). The accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, of a normal recurring nature, necessary to present fairly its financial position as of ~~December 31, 2018~~June 30, 2019 and the results of operations and cash flows for the three ~~and nine~~ months ended ~~December 31, 2018.~~June 30, 2019. The interim Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements, including the notes thereto, filed in the Company’s Fiscal ~~2018~~2019 Form 10-K.

Principles of Consolidation -The Condensed Consolidated Financial Statements include the Company, its wholly-owned subsidiaries, its majority-owned subsidiaries and variable interest entities (“VIEs”) of which the Company is the primary beneficiary. The Company uses the equity method of accounting for equity investments where it exercises significant influence but does not hold a controlling financial interest. Such investments are recorded in Other assets in the Condensed Consolidated Balance Sheets and the related equity earnings from these investments are included in Equity in net loss of unconsolidated affiliates in the Condensed Consolidated Statements of Operations. All intercompany balances and transactions have been eliminated in consolidation.

Acquisition of Infiltrator Water Technologies - On July 31, 2019, the Company completed its acquisition (the “Acquisition”) of Infiltrator Water Technologies Ultimate Holdings, Inc. (“IWT” or “Infiltrator”). IWT manufactures and sells wastewater systems for homes and provides drainage chambers for septic and storm water management. The Acquisition will combine the Company's industry leading position in stormwater management with IWT's leading platform in onsite septic waste management. See “Note 15. Subsequent Events” for additional information on the Acquisition.

~~Cloud Computing~~ Leases-~~On August 29, 2018,~~ In February 2016, the Financial Accounting Standards Board (the “FASB”) issued an accounting standard update (“ASU”) to provide guidance on implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract. The ASU, which was released in response to a consensus reached by the EITF at its June 2018 meeting, aligns the accounting for such costs with the guidance on capitalizing costs associated with developing or obtaining internal-use software. Specifically, the ASU includes in its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply CCA guidance to determine which implementation costs should be capitalized in such a CCA. The Company adopted this update effective July 1, 2018 on a prospective basis. The new standard did not have a material impact on the Condensed Consolidated Financial Statements.

~~Revenue Recognition -~~ ~~In May 2014, the FASB issued an ASU~~ which amends the guidance for revenue recognition. This amendment contains principles that will require an entity to recognize revenue to depict the transfer of goods and services to customers at an amount that an entity expects to be entitled to in exchange

for goods or services. The amendment sets forth a new revenue recognition model that requires identifying the contract, identifying the performance obligations and recognizing the revenue upon satisfaction of performance obligations. In August 2015, the FASB issued an additional ASU that deferred the effective date of the new revenue standard for public entities to periods beginning after December 15, 2017, with early adoption permitted but not earlier than the original effective date of periods beginning after December 15, 2016. There have also been various additional ASUs issued by the FASB in 2016 that further amend this new revenue standard. The updated standard permits the use of either the retrospective or cumulative effect transition method. The Company adopted these standards on April 1, 2018 using the modified retrospective transition method. See “Note 3. Revenue Recognition” for further information on the adoption of the revenue recognition ASUs.

~~Cash Flow Classification~~ -In August 2016, the FASB issued an ASU which provides amended guidance on the classification of certain cash receipts and cash payments in the statement of cash flows, including related to debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance and distributions received from equity method investees. This update is effective for fiscal years beginning after December 15, 2017, including interim periods within those years, and early adoption is permitted. This amended guidance must be applied retrospectively to all periods presented but may be applied prospectively if retrospective application would be impracticable. The Company adopted this update effective April 1, 2018 using the retrospective method. The new standard did not have a material impact on the Condensed Consolidated Financial Statements.

~~Goodwill Impairment~~ - ~~In January 2017, the FASB issued an ASU~~ which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the standards update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments are effective for annual periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted this update effective April 1, 2018. The new standard did not have an impact on the Condensed Consolidated Financial Statements.

~~Definition of a Business~~ - In January 2017, the FASB issued an ASU to clarify the definition of a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments provide a more robust framework to use in determining when a set of assets and activities is a business. The amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. ~~The Company adopted this update effective April 1, 2018. The new standard did not have an impact on the Condensed Consolidated Financial Statements.~~

~~Stock-Based Compensation -~~ In May 2017, the FASB issued an ASU to clarify when modification accounting should be applied for changes to the terms or conditions of share-based payment awards. The amendments clarify that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would not be required if the changes are considered non-substantive. The amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. ~~The Company adopted this update effective April 1, 2018. The new standard did not have an impact on the Condensed Consolidated Financial Statements.~~

~~Leases~~ - ~~In February 2016, the FASB issued an ASU which amends the guidance for leases.~~leases (“ASC 842”). This standard contains principles that will require an entity to recognize most leases on the balance sheet by recording a right-of-use asset and a lease liability, unless the lease is a short-term lease that has an accounting lease term

of twelve months or less. The standard also contains other changes to the current lease guidance that may result in changes to how entities determine which contractual arrangements qualify as a lease, the accounting for

executory costs, such as property taxes and insurance, as well as which lease origination costs will be capitalizable. This standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption of this standard is permitted. The standard allows the use of the modified retrospective transition method, whereby the new guidance will be applied at the beginning of the earliest period presented in the financial statements of the period of adoption. The modified retrospective transition approach includes certain practical expedients that entities may elect to apply in transition. In July 2018, the FASB amended ASC 842 to provide another transition method, allowing a cumulative effect adjustment to the opening balance of retained earnings during the period of adoption. The Company ~~has implemented a new software solution to improve the process of tracking and accounting for leases under the current and new standards. The Company will adopt this standard~~adopted these standards effective April 1, 2019 using the ~~modified retrospective~~ transition method in the July 2018 ASU which does not require adjustments to comparative periods or require modified disclosures for those ~~periods. The Company expects to elect the~~periods and includes transition relief practical expedients. “Note 4. Leases” for further information on the adoption of the new lease ASUs.

Hedge Accounting - In August 2017, the FASB issued an ASU which expanded an entity’s ability to apply hedge accounting for non-financial and financial risk components and provided a simplified approach for fair value hedging of interest rate risk. The standard also refined how entities assess hedge effectiveness. The Company ~~is continuing to evaluate the~~adopted this standard effective April 1, 2019. The new standard did not have an impact on ~~its~~the Condensed Consolidated Financial Statements. The Company currently does not expect the adoption of ASC 842 to have a material impact on the Statement of Operations or Statement of Cash Flows. The recording of right-of-use assets and lease liabilities is expected to have a material impact on the Company’s Condensed Consolidated Balance Sheet.

Measurement of Credit Losses-In June 2016, the FASB issued an ASU which provides amended guidance on the measurement of credit losses on financial instruments, including trade receivables. This standard requires the use of an impairment model referred to as the current expected credit loss model. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those years, and early adoption is permitted for fiscal years beginning after December 15, 2018. The Company expects to adopt this standard effective April 1, 2020. The Company is currently evaluating the impact of this standard on the Condensed Consolidated Financial Statements.

~~Hedge Accounting~~ ~~– In August 2017, the FASB issued an ASU which expands an entity’s ability to apply hedge accounting~~Except for non-financial and financial risk components and provides a simplified approach for fair value hedging of interest rate risk. The standard also refines how entities assess hedge effectiveness. This standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those years, and early adoption is permitted. ~~The Company expects to adopt this standard effective April 1, 2019.~~ ~~The Company is currently evaluating the impact of this standard on the Condensed Consolidated Financial Statements.~~

~~Fair Value Measurement~~ – In August 2018, the FASB issued an ASU that is intended to improve the effectiveness of disclosures in notes to financial statements. The standard removes, modifies and adds certain disclosure requirements related to fair value measurements. This standard is effective for fiscal years beginning after December 15, 2019. The standard requires the use of the retrospective transition method for specific amendments within the ASU and the prospective treatment of other amendments. Early adoption is permitted. ~~The Company will early adopt this ASU, effective for the Company’s~~ ~~Annual Report on Form 10-K for the year ending March 31, 2019. The Company is currently evaluating the impact of this standard on the Condensed Consolidated Financial Statements.~~

~~With the exception of~~ the pronouncements described above, there have been no new accounting pronouncements issued or adopted since the filing of the Fiscal ~~2018~~2019 Form 10-K that have significance, or potential significance, to the Condensed Consolidated Financial Statements.

In fiscal 2018, the Company initiated restructuring activities (the “2018 Restructuring Plan”), which ~~will continue throughout~~concluded during fiscal 2019, including closing underutilized manufacturing facilities, reducing headcount, optimizing product offerings and eliminating nonessential costs, designed to improve the Company’s cost structure. The Company closed one and three manufacturing facilities in the nine months ended December 31,

2018 and 2017, respectively. As additional restructuring opportunities may be identified, the Company does not have an estimated completion date or expected total cost estimate for the 2018 Restructuring Plan.

2019. The following table summarizes the activity included in Loss on disposal of assets and costs from exit and disposal activities recorded during the three ~~and nine~~ months ended ~~December 31, 2018~~June 30, 2019 and ~~2017:~~2018:

	Three Months Ended December 31,					Nine Months Ended December 31,				Three Months Ended June 30,
	2018			2017		2018		2017		2019		2018
	(In thousands)									(In thousands)
Accelerated depreciation	$	—		$	—	$	430	$	3,561
Plant severance		39			1,021		122		1,848	$	—	$	(35	)
Headcount reduction		237			—		237		2,577
Product optimization		48			—		351		—
Other restructuring activities		114			56		316		56		—		31
Total 2018 Restructuring Plan activities	$	438		$	1,077	$	1,456	$	8,042	$	—	$	(4	)
(Gain) loss on other disposals and partial disposals of property, plant and equipment		(294	)		847		116		2,426
Loss on other disposals and partial disposals of property, plant and equipment											707		1,108
Total loss on disposal of assets and costs from exit and disposal activities	$	144		$	1,924	$	1,572	$	10,468	$	707	$	1,104

~~Approximately $0.3 million and $1.1 million of the total~~All 2018 Restructuring Plan activities related to the Domestic reporting segment for the three ~~and nine~~ months ended December 31, 2018, respectively. Approximately $1.1 million and $8.0 million of the total 2018 restructuring Plan activities related to the Domestic reporting segment for the three and nine months ended December 31, 2017, respectively. There was $0.1 and $0.4 million of the total 2018 Restructuring Plan activities related to the International reporting segment for the three and nine months ended December 31, 2018, respectively. There were no 2018 Restructuring Plan activities for the three and nine months ended December 31, 2017 related to the International reporting segment, respectively.June 30, 2018.

A reconciliation of the beginning and ending amounts of restructuring liability related to the 2018 Restructuring Plan at ~~December 31,~~June 30, 2019 and 2018 ~~and 2017~~ is as follows:

	Nine Months Ended December 31,						Three Months Ended June 30,
	2018			2017			2019			2018
(Amounts in thousands)	(In thousands)
							(In thousands)
Balance at the beginning of the period	$	3,901		$	—		$	1,696		$	3,901
Expenses		316			56			—			55
Non-cash expenses		359			4,425			—			(59	)
Payments		(2,497	)		(1,621	)		(598	)		(1,074	)
Balance at the end of the period	$	2,079		$	2,860		$	1,098		$	2,823

As of ~~December 31, 2018,~~June 30, 2019, the Company had ~~$0.7~~$0.2 million of long-term severance liability related to the restructuring activities recorded in other liabilities in the Condensed Consolidated Balance Sheet. The current portion of the restructuring liability is recorded in Other accrued liabilities in the Condensed Consolidated Balance Sheet.

~~On April 1, 2018, the Company adopted Accounting Standards Codification Topic 606,~~ Revenue from Contracts with Customers (“ASC 606”), and all related amendments using the modified retrospective transition method. The adoption of ASC 606 did not impact the opening retained earnings balance or cause a

material shift in the amount or timing of revenue recognition. Results for reporting periods beginning after April 1, 2018 are presented under ASC 606, while prior period amounts were not adjusted and continue to be reported in a consistent manner with historical accounting policies.

The Company generates 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 the Company’s internal fleet, and the Company does 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 the Company’s contracts with customers, control is transferred to the customer upon delivery. The Company recognizes revenue in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Revenue is presented in the Condensed Consolidated Statements of Operationsdisaggregates net ~~of allowances for returns, rebates, discounts, and taxes collected concurrently with revenue-producing activities.~~

~~Refer to “Note 13. Business Segments Information” for the Company’s disaggregation of Net~~ sales by ~~reportable segment. The disclosure of Net sales by reportable segment is aligned by geographical~~geographic region and product type, ~~and~~consistent with its reportable segment disclosure. This disaggregation level best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

~~Significant Judgments -~~ ~~The~~ Refer to “Note 14. Business Segments Information” for the Company’s performance obligation under contracts with customers is to sell and deliver pipe and related water management products. The Company’s contracts with customers may contain multiple performance obligationsdisaggregation of Net sales by promising to deliver multiple products to the customer. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis.

The Company’s products are generally sold with a right of return, and the Company may provide credits or incentives, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Variable consideration is estimated at contract inception and updated at the end of each reporting period as additional information becomes available and only to the extent that it is probable that a significant reversal of any incremental revenue will not occur.reportable segment.

Contract Balances - The Company recognizes a contract asset representing the Company’s right to recover products upon the receipt of returned products and a contract liability for the customer refund. The adoption of this standard resulted in the Company recording a contract asset for estimated inventory returns. On April 1, 2018, the estimated inventory returns resulted in a $0.6 million decrease in Receivables, net and a $0.6 million increase in Other current assets on the Company’s Consolidated Balance Sheets. The following table presents the balance of the Company’s contract asset and liability as of ~~December~~June 30, 2019 and March 31, ~~2018 and April 1, 2018:~~2019:

	December 31, 2018		April 1, 2018		June 30, 2019		March 31, 2019
	(In thousands)				(In thousands)
Contract asset - product returns	$	851	$	577	$	787	$	646
Refund liability		1,847		1,468		1,698		1,372

ASC 842 Adoption- The Company ~~expenses incremental costs~~adopted the provisions of ASC 842 beginning on April 1, 2019 using the transition methodology in ASC 842 which does not require adjustments to ~~obtain a contract (e.g. sales commissions) when incurred as the amortization period would have been one year~~comparative periods or ~~less. These costs are recorded within selling expenses on the Condensed Consolidated Statements of Operations.~~

require modified disclosures. The Company ~~has~~elected the transition relief practical expedients. ASC 842 provides lessees with the option of electing an accounting policy, by class of underlying asset, in which the lessee may choose not to separate nonlease components from lease components. The Company elected this practical expedient for leases of certain classes of equipment. The Company also elected the accounting policy ~~election permitted by~~to not recognize the right-of-use asset and lease liability for leases with an initial expected term of 12 months or less (“Short-term leases”). The adoption of ASC ~~606~~842 resulted in the recording of $13.3 million of additional lease liabilities and corresponding right-of-use assets to ~~account for shipping and handling costs as activities to fulfill~~ the ~~promise to transfer the goods when these activities are performed after a customer obtains control~~beginning balance of the ~~goods. Revenue will~~Company’s Condensed Consolidated Balance Sheet. The adoption did not have an impact on the Company’s Condensed Consolidated Statement of Operations and Condensed Consolidated Statement of Cash Flows.

Nature of the Company’s Leases - The Company has operating and finance leases for plants, yards, corporate offices, tractors, trailers and other equipment. The Company’s leases have a remaining term of less than one year to 30 years, some of which include options to extend the leases for up to 5 years.

The Company’s lease payments are generally fixed. Certain equipment leases contain residual value guarantees that create a contingent obligation on the part of the Company to compensate the lessor if the leased asset cannot be ~~recognized~~sold for an amount in excess of a specified minimum value at the ~~point~~conclusion of ~~shipment.~~the lease term. The calculation is based on the original cost of the transportation equipment, less lease payments made, compared to a percentage of the transportation equipment’s fair market value at the time of sale. All leased units covered by this guarantee have been classified as finance leases and a corresponding finance lease obligation was recorded. Therefore, no contingent obligation is needed.

For all leases with an initial expected term of more than 12 months, the Company recorded, at the adoption date of ASC 842 or lease commencement date for leases entered into after the adoption date, a lease liability, which is the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company will utilize its collateralized incremental borrowing rate commensurate to the lease term as the discount rate for its leases, unless the Company can specifically determine the lessor’s implicit rate. The incremental borrowing rate for each is lease is determined based on its term and adjusted for the impacts of collateral.

Lease Expense- The components of lease expense for the three months ended June 30, 2019 was as follows:

Supplemental cash flow information related to leases for the three months ended June 30, 2019 was as follows:

Supplemental balance sheet information related to leases as of June 30, 2019 was as follows:

The ~~Company has elected~~following is a schedule by year of future minimum lease payments on a rolling twelve-month basis under operating and finance leases and the accounting policy to exclude from the transaction price all sales taxes that are assessed by a governmental authority and that are imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer, for example, sales, use, value added, and some excise taxes.

~~Further, the Company does not disclose the~~present value of ~~unsatisfied performance~~the net minimum lease payments as of June 30, 2019:

As of March 31, 2019, total contractual obligations for ~~contracts with an original expected length of one year or less.~~capital and operating leases were as follows:

	December 31, 2018		March 31, 2018		June 30, 2019		March 31, 2019
	(In thousands)				(In thousands)
Raw materials	$	48,488	$	54,909	$	44,607	$	47,910
Finished goods		197,963		208,883		185,677		216,630
Total inventories	$	246,451	$	263,792	$	230,284	$	264,540

When applying fair value principles in the valuation of assets and liabilities, the Company is required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The Company has not changed its valuation techniques used in measuring the fair value of any financial assets or liabilities during the fiscal periods presented. The fair value estimates take into consideration the credit risk of both the Company and its counterparties.

When active market quotes are not available for financial assets and liabilities, ~~ADS~~the Company uses industry standard valuation models. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including credit risk, interest rate curves, foreign currency rates and forward and spot prices for currencies. In circumstances where market-based observable inputs are not available, management judgment is used to develop assumptions to estimate fair value. Generally, the fair value of Level 3 instruments is estimated as the net present value of expected future cash flows based on internal and external inputs.

Recurring Fair Value Measurements -The assets and liabilities carried at fair value as of the periods presented were as follows:

	December 31, 2018								June 30, 2019
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(In thousands)								(In thousands)
Assets:
Derivative assets – diesel fuel contracts	$	122	$	—	$	122	$	—	$	151	$	—	$	151	$	—
Interest rate swaps		2,034		—		2,034		—
Total assets at fair value on a recurring basis	$	2,156	$	—	$	2,156	$	—	$	151	$	—	$	151	$	—
Liabilities:
Derivative liabilities – diesel fuel contracts	$	851	$	—	$	851	$	—	$	314	$	—	$	314	$	—
Interest rate swaps										638		—		638		—
Contingent consideration for acquisitions		228		—		—		228		57		—		—		57
Foreign exchange forward contracts		35		—		35		—		53		—		53		—
Total liabilities at fair value on a recurring basis	$	1,079	$	—	$	851	$	228	$	1,062	$	—	$	1,005	$	57

	March 31, 2018								March 31, 2019
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(In thousands)								(In thousands)
Assets:
Derivative assets – diesel fuel contracts	$	596	$	—	$	596	$	—	$	189	$	—	$	189	$	—
Interest rate swaps		2,801		—		2,801		—		1,088		—		1,088		—
Total assets at fair value on a recurring basis	$	3,397	$	—	$	3,397	$	—	$	1,277	$	—	$	1,277	$	—
Liabilities:
Derivative liability - diesel fuel contracts	$	116	$	—	$	116	$	—	$	283	$	—	$	283	$	—
Foreign exchange contracts										60		—		60		—
Contingent consideration for acquisitions		578		—		—		578		203		—		—		203
Total liabilities at fair value on a recurring basis	$	694	$	—	$	116	$	578	$	546	$	—	$	343	$	203

For the three ~~and nine~~ months ended ~~December 31,~~June 30, 2019 and 2018, ~~and 2017,~~ respectively, there were no transfers in or out of Levels 1, 2 or 3.

Valuation of Contingent Consideration for Acquisitions - The fair values of the contingent consideration payables for acquisitions were calculated based on a discounted cash flow model, whereby the probability-weighted future payment value is discounted to the present value using a market discount rate. The method used to price these liabilities is considered Level ~~3, due to the subjective nature of the unobservable inputs used to determine the fair value.~~3. Changes in the fair value of recurring fair value measurements using significant unobservable inputs (Level 3) for the periods presented were as follows:

	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended June 30,
	2018			2017			2018			2017			2019			2018
	(In thousands)												(In thousands)
Balance at the beginning of the period	$	325		$	735		$	578		$	1,348		$	203		$	578
Change in fair value		6			1			15			33			—			2
Payments of contingent consideration liability		(103	)		(96	)		(365	)		(741	)		(146	)		(120	)
Balance at the end of the period	$	228		$	640		$	228		$	640		$	57		$	460

Valuation of Debt - The carrying amounts of current financial assets and liabilities approximate fair value because of the immediate or short-term maturity of these items, or in the case of derivative instruments, because they are recorded at fair value. The carrying and fair value of the Company’s Senior Notes ~~(discussed~~(as defined below and further discussed in “Note ~~12.~~13. Debt” to the Company’s audited financial statements included in the ~~Company’s~~ Fiscal ~~2018~~2019 Form 10-K) were $100.0 million and ~~$97.8~~$100.5 million, respectively, as of ~~December 31, 2018~~June 30, 2019 and ~~$125.0~~$100.0 million and ~~$122.3~~$98.9 million, respectively, at March 31, ~~2018.~~2019. The fair value of the Senior Notes was determined

based on a comparison of the interest rate and terms of such borrowings to the rates and terms of similar debt available for the period. The Company believes the carrying amount on the remaining long-term debt, including debt under the ~~Secured Bank Term Loans,~~PNC Credit Agreement (as defined below), is not materially different from its fair value as the interest rates and terms of the borrowings are similar to currently available borrowings. The categorization of the framework used to evaluate this debt is considered Level 2.

The Company uses interest rate swaps, commodity options in the form of collars and swaps, and foreign currency forward contracts to manage its various exposures to interest rate, commodity price fluctuations and foreign currency exchange rate fluctuations. ~~For the interest~~Interest rate swap ~~executed on June 28, 2017,~~ gains and losses resulting from the difference between the spot rate and applicable base rate is recorded in the Condensed Consolidated Statements of Operations in Interest expense. For collars, commodity swaps and foreign currency forward contracts, contract settlement gains and losses are recorded in the Condensed Consolidated Statements of Operations in Derivative gains and other income, net. Gains and losses related to mark-to-market adjustments for changes in fair value of the derivative contracts are also recorded in the Condensed Consolidated Statements of Operations in Derivative gains and other income, net.

The Company recorded net losses and net (gains) on mark-to-market adjustments for changes in the fair value of derivatives contracts as well as net losses and net (gains) on the settlement of derivative contracts as follows:

	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended June 30,
	2018			2017			2018			2017			2019			2018
	(In thousands)												(In thousands)
Diesel fuel option collars	$	1,067		$	(333	)	$	1,209		$	(735	)	$	69		$	(12	)
Interest rate swaps		1,810			(1,065	)		767			(1,253	)		1,726			(613	)
Foreign exchange forward contracts		35			—			35			—			(7	)		—
Total net unrealized mark-to-market loss (gains)	$	2,912		$	(1,398	)	$	2,011		$	(1,988	)	$	1,788		$	(625	)
Diesel fuel option collars		(126	)		(203	)		(700	)		(204	)		7			(308	)
Foreign exchange forward contracts		(73	)		—			(163	)		—			—			(51	)
Interest rate swaps		(99	)		138			(191	)		286			(166	)		(25	)
Total net realized (gains) loss	$	(298	)	$	(65	)	$	(1,054	)	$	82
Total net realized gains													$	(159	)	$	(384	)

A summary of the fair value of derivatives is included in “Note 5.6. Fair Value Measurement.” On July 24, 2019, the Company liquidated its interest rate swap, diesel fuel option collars and foreign exchange forward contracts.

The Company is required to apply the two-class method to compute both basic and diluted net income per share. The two-class method is an earnings allocation formula that treats participating securities as having rights to earnings that would otherwise have been available to common stockholders.

The following table presents information necessary to calculate net income per share for the periods presented, as well as potentially dilutive securities excluded from the weighted average number of diluted common shares outstanding because their inclusion would have been anti-dilutive:

	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended June 30,
(In thousands, except per share data)	2018			2017			2018			2017			2019			2018
NET INCOME PER SHARE—BASIC:
Net income attributable to ADS	$	15,812		$	32,105		$	76,762		$	67,710
Net (loss) income attributable to ADS													$	(226,356	)	$	32,280
Adjustments for:
Dividends to redeemable convertible preferred stockholders		(467	)		(456	)		(1,442	)		(1,415	)		(6,841	)		(497	)
Dividends paid to unvested restricted stockholders		(25	)		(12	)		(55	)		(47	)		(328	)		(15	)
Net income available to common stockholders and participating securities		15,320			31,637			75,265			66,248
Net (loss) income available to common stockholders and participating securities														(233,525	)		31,768
Undistributed income allocated to participating securities		(1,027	)		(2,766	)		(6,048	)		(5,588	)		—			(2,712	)
Net income available to common stockholders – Basic	$	14,293		$	28,871		$	69,217		$	60,660
Net (loss) income available to common stockholders – Basic													$	(233,525	)	$	29,056
Weighted average number of common shares outstanding – Basic		57,180			55,917			56,925			55,497			57,576			56,594
Net income per common share – Basic	$	0.25		$	0.52		$	1.22		$	1.09
Net (loss) income per common share – Basic													$	(4.06	)	$	0.51
NET INCOME PER SHARE—DILUTED:
Net income available to common stockholders – Diluted	$	14,293		$	28,871		$	69,217		$	60,660
Net (loss) income available to common stockholders – Diluted													$	(233,525	)	$	29,056
Weighted average number of common shares outstanding – Basic		57,180			55,917			56,925			55,497			57,576			56,594
Assumed exercise of stock options		505			542			557			627			—			564
Weighted average number of common shares outstanding – Diluted		57,685			56,459			57,482			56,124			57,576			57,158
Net income per common share – Diluted	$	0.25		$	0.51		$	1.20		$	1.08
Net (loss) income per common share – Diluted													$	(4.06	)	$	0.51
Potentially dilutive securities excluded as anti-dilutive		6,079			6,060			6,068			6,252			10,806			6,166

Stockholders’ Equity –~~During the nine months ended December 31, 2017, the Company repurchased 0.4 million shares of common stock at a cost of $7.9 million.~~- The Company did not repurchase any shares of common stock during the three ~~and nine~~ months ended ~~December 31,~~June 30, 2019 and 2018. The ~~repurchases were made under the~~Company’s Board of Directors’ ~~authorization~~ in February 2017 authorized the Company to repurchase up to $50 million of ADS common stock in accordance with applicable securities laws. As of ~~December 31, 2018,~~June 30, 2019, approximately $42.1 million of common stock may be repurchased under the authorization. The repurchase program does not obligate the Company to acquire any particular amount of common stock and may be suspended or terminated at any time at the Company’s ~~discretion.~~discretion.

Special Dividend and the Employees Stock Ownership Plan (“ESOP”) - During the three months ended June 30, 2019, the Board of Directors approved a special cash dividend of $1.00 per share and a quarterly dividend of $0.09. The special and quarterly dividend were paid to all stockholders on June 14, 2019 to stockholders of record at the close of business on June 3, 2019. The total dividend payment was $81.6 million. The dividends received by the unallocated redeemable convertible preferred stock held in the ESOP trust was used to pay $12.0 million of the ESOP loan back to the Company resulting in approximately 11.6 million shares of the Company’s redeemable convertible preferred stock being allocated to ESOP participants. The Company recognized $246.8 million in stock-based compensation expense based on the fair value on the date the Board of Directors approved the special dividend. The Board of Director’s approval committed the ESOP to use those proceeds to pay down the ESOP loan. The special dividend compensation expense was recognized in Cost of goods sold - ESOP special dividend compensation and Selling, general and administrative expenses - ESOP special dividend compensation on the Company’s Consolidated Statement of Operations. The

Company’s ESOP is further described in “Note16. Employee Benefit Plans” to the Company’s audited financial statements included in the Fiscal 2019 Form 10-K.

ADS Mexicana - ADS conducts business in Mexico and Central America through its joint venture ADS Mexicana, S.A. de C.V. (together with its affiliate ADS Corporativo, S.A. de C.V., “ADS Mexicana”). ADS owns 51% of the outstanding stock of ADS Mexicana and consolidates ADS Mexicana for financial reporting purposes.

~~ADS Mexicana’s Revolving Credit Facility expired on~~On June 22, 2018, the Company and ~~was replaced by~~ADS Mexicana entered into an Intercompany Revolving Credit Promissory Note (the “Intercompany Note”) with a borrowing capacity of $12.0 million. The Intercompany Note matures on June 22, 2022. The other joint venture partner indemnifies the Company for 49% of any unpaid borrowing. The interest rates under the Intercompany Note are determined by certain

base rates or London Interbank Offered Rate (“LIBOR”) plus an applicable margin based on the Leverage Ratio. As of ~~December 31, 2018,~~June 30, 2019, there were no borrowings under the Intercompany Note.

South American Joint Venture -The Tuberias Tigre –- ADS Limitada joint venture (the “South American Joint Venture”) manufactures and sells HDPE corrugated pipe in certain South American markets. The South American Joint Venture operates within Argentina, which on July 1, 2018, was identified for high inflationary accounting. The Company has determined the effect of a change in the exchange rate under high inflationary accounting is not expected to have a material effect on the Company’s results in any interim or annual period. ADS owns 50% of the South American Joint Venture. The Company has concluded that it is appropriate to account for these investments using the equity method, whereby the Company’s share of the income or loss of the joint venture is reported in the Condensed Consolidated Statements of Operations under Equity in net loss (income) of unconsolidated affiliates and the Company’s investment in the joint venture is included in Other assets in the Condensed Consolidated Balance Sheets. ADS is the guarantor of 50% of the South American Joint Venture’s credit facility, and the debt guarantee is shared equally with the joint venture partner. The Company’s maximum potential obligation under this guarantee is $11.0 million as of ~~December 31, 2018.~~June 30, 2019. The maximum borrowings permitted under the South American Joint Venture’s credit facility are $22.0 million. This credit facility allows borrowings in either Chilean pesos or US dollars at a fixed interest rate determined at inception of each draw on the facility. The guarantee of the South American Joint Venture’s debt expires on December 31, 2020. ADS does not anticipate any required contributions related to the balance of this credit facility. As of ~~December 31, 2018~~June 30, 2019 and March 31, ~~2018,~~2019, the outstanding principal balances of the credit facility including letters of credit were ~~$12.6~~$12.2 million and ~~$14.5~~$12.3 million, respectively. As of ~~December 31, 2018,~~June 30, 2019, there were no U.S. dollar denominated loans. The weighted average interest rate as of ~~December 31, 2018~~June 30, 2019 was 5.6% on Chilean peso denominated loans.

ADS and the South American Joint Venture have shared services arrangements in order to execute the joint venture services. In addition, the South American Joint Venture has entered into agreements for pipe sales to ADS and its other related parties, which totaled $0.4 million ~~and $1.1million~~ for the three ~~and nine~~ months ended ~~December 31, 2018, respectively,~~June 30, 2019, and $0.6 ~~million and $1.4~~ million for the three ~~and nine~~ months ended ~~December 31, 2017, respectively.~~June 30, 2018. ADS pipe sales to the South American Joint Venture were $0.3 million and ~~$0.1~~$0.2 million for the three months ended ~~December 31,~~June 30, 2019 and 2018, ~~and 2017, respectively, and $0.8 million and $0.3 million for the nine months ended December 31, 2018 and 2017,~~ respectively.

~~BaySaver~~ Tigre USA - ~~BaySaver Technologies LLC (“BaySaver”)~~Tigre USA was a joint venture that ~~was established to produce and distribute water quality filters and separators used in the removal of sediment and pollution from storm water. During the third quarter,~~ ADS purchased the remaining 35% ownership interest in BaySaver for a purchase price of $8.8 million. The purchase of the remaining 35% ownership interest was reflected as a reduction in the Redeemable noncontrolling interest in subsidiary in the Condensed Consolidated Balance Sheets and as a financing activity in the Condensed Consolidated Statement of Cash Flows. Additionally, resulting from this transaction, the Company recorded a non-cash adjustment to deferred taxes. BaySaver in now a wholly-owned subsidiary of ADS.

ADS and BaySaver were parties to a shared services arrangement, prior to the acquisition, which provided for the provision of certain joint venture services. Included within this arrangement was the lease of a plant and adjacent yard used to conduct business and operating expenses related to the leased facility.

~~Tigre-ADS USA~~ - Tigre-ADS USA was a joint venture established to manufacture and sell polyvinyl chloride (“PVC”) fittings for waterworks, plumbing, and HVAC applications primarily in the United States and Canadian markets. In April 2018, the Company and the joint venture partner agreed to exchange the Company’s shares of Tigre-ADS USA for a release from the existing debt guarantees. Following the exchange, the Company no longer has an ownership interest in, ~~Tigre-ADS USA.~~but the owner is the partner for the South American Joint Venture.

ADS purchased ~~$0.3 million and~~ $0.5 million of ~~Tigre-ADS~~Tigre USA manufactured products for use in the production of ADS products during the three months ended ~~December 31, 2018~~June 30, 2019 and ~~2017, respectively, and $1.5 million and $1.6 million during the nine months ended December 31, 2018 and 2017, respectively.~~2018.

	December 31, 2018			March 31, 2018			June 30, 2019			March 31, 2019
	(In thousands)						(In thousands)
Secured Bank Term Loans:
Revolving Credit Facility — ADS	$	126,500		$	171,500
Revolving Credit Facility — ADS Mexicana		—			—
Revolving Credit Facility							$	156,200		$	134,400
Senior Notes payable		100,000			125,000			100,000			100,000
Industrial revenue bonds		240			940
Equipment financing		2,656			3,336			2,195			2,427
Total		229,396			300,776			258,395			236,827
Unamortized debt issuance costs		(2,467	)		(3,028	)		(2,119	)		(2,293	)
Current maturities		(26,165	)		(26,848	)		(25,939	)		(25,932	)
Long-term debt obligation	$	200,764		$	270,900		$	230,337		$	208,602

Letters of credit outstanding at ~~December 31, 2018~~June 30, 2019 and March 31, ~~2018~~2019 amounted to ~~$8.6~~$8.4 million and ~~$13.0~~$8.5 million, respectively, and reduce the availability of the ~~Revolving Credit Facilities.~~

~~Events Related to the Secured Bank Term Loans -~~ ~~On June 22, 2018,~~existing revolving credit facilities under the Company’s $12.0 million Revolving Credit Facility – ADS Mexicana matured. At June 22, 2018, there were no borrowings under the Revolving Credit Facility – ADS Mexicana. Refer to “Note 8. Related Party Transactions” for additional information on the Intercompany Note which replaced the Revolving Credit Facility – ADS Mexicana.

~~Fiscal 2019 Amendment to the Secured Bank Term Loans~~ ~~– On July 9, 2018, the Company amended the~~ Second Amended and Restated Credit Agreement (the “PNC Credit Agreement”) with PNC Bank, National Association, as administrative agent and various financial institutions thereto.

In July 2019, the Company entered into a credit agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) by and among the ~~Second Amended~~Company, as borrower, Barclays Bank PLC, as administrative agent, the several lenders from time to time party thereto, and ~~Restated Private Shelf Agreement (the “Private Shelf Agreement”) to amend~~Barclays Bank PLC and Morgan Stanley Senior Funding, Inc., as joint lead arrangers, joint bookrunners, syndication agents and documentation agents.

On the ~~definition of Consolidated EBITDA and changed~~Closing Date, the ~~timing of the quarterly rate adjustments. In addition, the amendment to~~Company borrowed under the Credit Agreement ~~clarified~~to repay the ~~process of a transition to replace LIBOR which is being phased out.~~ outstanding indebtedness under the PNC Credit Agreement. See “Note 15. Subsequent Events” for additional details on the Credit Agreement and the debt repayment.

Purchase Commitments – - The Company secures supplies of resin raw material by agreeing to purchase quantities during a future given period at a fixed price. These purchase contracts typically range from 1 to 12 months and occur in the ordinary course of business. Under such non-cancelable purchase contracts in place at ~~December 31, 2018,~~June 30, 2019, the Company has agreed to purchase resin over the period ~~January~~July 2019 through December 2019 at a committed purchase cost of ~~$23.5~~$11.8 million.

Litigation and Other Proceedings – As previously disclosed in the Company’s Fiscal 2018 Form 10-K, the Company’s historical accounting practices were the subject of an investigation by SEC’s Division of Enforcement (the “Enforcement Division”), which began in August 2015. That matter was resolved on July 10, 2018 via a settlement between the Company and the SEC. Pursuant to the settlement, the Company consented to the entry of an administrative order without admitting or denying the findings therein. The order required the Company to cease and desist from committing or causing any violations and any future violations of certain provisions of the federal securities laws and the rules promulgated thereunder and to pay a civil monetary penalty of $1.0 million, which payment has been made. The Company previously accrued an expense for the penalty amount during Fiscal 2018.

-On July 29, 2015, a putative stockholder class action, Christopher Wyche, individually and on behalf of all others similarly situated v. Advanced Drainage Systems, Inc., et al. (Case No. 1:15-cv-05955-KPF), was commenced in the U.S. District Court for the Southern District of New York (the “District Court”), naming the Company, along with Joseph A. Chlapaty, the Company’s former Chief Executive Officer, and Mark B. Sturgeon, the Company’s former Chief Financial Officer, as defendants and alleging violations of the federal

securities laws. An amended complaint was filed on April 28, 2016. The amended complaint alleged that the Company made material misrepresentations and/or omissions of material fact in its public disclosures during the period from July 25, 2014 through March 29, 2016, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. On March 10, 2017, the District Court dismissed plaintiff’s claims against all defendants in their entirety and with prejudice. Plaintiff appealed to the United States Court of Appeals for the Second Circuit, and on October 13, 2017 the District Court’s judgment was affirmed by the Second Circuit. On October 27, 2017, plaintiff filed a petition for rehearing with the Second Circuit. The Second Circuit denied the petition for rehearing on November 28, 2017. On November 27, 2018, the plaintiff filed with the District Court a motion for relief from final judgment and for leave to file an amended complaint, ~~with~~which, the defendants opposed. On July 3, 2019, the District ~~Court. The defendants have opposed~~Court denied the plaintiff’s ~~motion and are awaiting a decision by the District Court.~~motion. While it is reasonably possible that this matter

ultimately could be decided unfavorably to the Company, the Company is currently unable to estimate the range of the possible losses, but it could be material.

The Company is involved from time to time in various legal proceedings that arise in the ordinary course of business, including but not limited to commercial disputes, environmental matters, employee related claims, intellectual property disputes and litigation in connection with transactions including acquisitions and divestitures. The Company does not believe that such litigation, claims, and administrative proceedings will have a material adverse impact on the Company’s financial position or results of operations. The Company records a liability when a loss is considered probable, and the amount can be reasonably estimated.

In March 2019, the Company initiated an internal investigation process, under the guidelines of the Company’s Code of Business Conduct and Ethics, into its consolidated joint venture affiliate ADS Mexicana’s senior management’s ethical and business conduct, as well as compliance of certain products with, along with considerations into, Mexican laws and regulations over the previous 12 months. The Company has recorded an accrual for the current estimate of probable losses resulting from the investigation which is not material to our Condensed Consolidated Financial Statements. However due to the inherent uncertainties in determining the use, installation application and location of our ADS Mexicana products sold, along with the consideration of Mexican laws and regulations related to warranty and product liability obligations, the Company is unable to determine the maximum potential future losses that may occur, which could be material to the Condensed Consolidated Financial Statements.

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, lowering the U.S. corporate income tax rate from 35% to 21%, full expensing on qualified property, eliminates the domestic manufacturing deduction and implements a territorial tax system. The 21% U.S. corporate income tax rate was effective January 1, 2018.

The Company previously recognized the provisional tax impacts related to revaluation of deferred tax assets and liabilities and deemed repatriated earnings and included these amounts in its financial statements for the year ended March 31, 2018. During the three months ended December 31, 2018, the Company finalized the accounting for the Tax Act. During the three and nine months ended December 31, 2018, the Company did not make any material adjustments to its provisional amounts included in its consolidated financial statements for the year ended March 31, 2018.

The Company recognized a provisional amount for revaluing its deferred tax attributes resulting in a $16.0 million tax benefit that was recorded for the fiscal year ended March 31, 2018. On the basis of revised computations in filing the U.S. federal tax return during the third quarter, the Company recognized an additional measurement-period adjustment of $0.4 million to deferred tax expense for the three and nine months ended December 31, 2018. A total deferred tax benefit of $15.6 million was recorded. The Company’s accounting for its deferred tax attributes is now complete.

The Company had $26.5 million of undistributed earnings on its foreign subsidiaries subject to the deemed mandatory repatriation. The Company recognized a provisional amount of $5.2 million of income tax expense that was recorded for the fiscal year ended March 31, 2018. After the utilization of existing foreign tax credits, the Company expected to pay additional U.S. federal taxes of approximately $1.0 million as of the fiscal year ended March 31, 2018. On the basis of revised computations in filing the U.S. federal tax return during the third quarter, the Company recognized an additional measurement-period adjustment of $0.6 million to income tax benefit for the three and nine months ended December 31, 2018. A total transition tax expense of $4.6 million was recorded. After the utilization of existing foreign tax credits, the Company paid an additional U.S. federal taxes of $0.7 million. The Company’s accounting for the deemed mandatory repatriation tax is now complete.

The Company’s effective tax rate will vary based on a variety of factors, including overall profitability, the geographical mix of income before taxes and related tax rates in jurisdictions where it operates and other one-time charges, as well as discrete events. For the three months ended ~~December 31,~~June 30, 2019 and 2018, ~~and 2017,~~ the Company utilized an effective tax rate of ~~13.4%~~(10.9%) and ~~(29.4)%~~29.7%, respectively, to calculate its provision for income taxes. ~~For~~Consistent with the ~~nine~~three months ended ~~December 31,~~June 30, 2018, state and ~~2017,~~local income taxes and the ~~Company utilized an effective tax~~Company’s ESOP increased the rate ~~of 26.6% and 18.6%, respectively, to calculate its provision~~ for ~~income taxes.~~

~~The~~the three months ended June 30, 2019. Additionally, the effective tax rate for the three months ended ~~December 31, 2018~~June 30, 2019 differed from the federal statutory rate due to a $1.8 million discrete income tax benefit related to the release of tax reserves due to the lapse of statute of limitations. The Company’s effective tax rate is higher than the federal statutory rate primarily due to ~~state and local~~a $60.7 million discrete income ~~taxes and our Employee Stock Ownership Plan (“ESOP”) for~~tax expense. This discrete event related to the ~~nine months ended December 31, 2018. The Company’s effective tax rate varied significantly~~11.6 million shares allocated from the ~~federal statutory rate~~ESOP as a result of the ~~Tax Act~~special dividend made on June 14, 2019 and ~~other~~the Company recognizing approximately $246.8 million in additional stock-based compensation expense. Of the total stock-based compensation expense, approximately $237.6 million related to non-deductible stock appreciation. This discrete ~~items during~~event reduced the ~~three and nine months ended December 31, 2017.~~effective tax rate by (29.6%).

ADS has several programs for stock-based payments to employees and non-employee members of its Board of Directors, including stock options and restricted stock. Equity-classified restricted stock awards are measured based on the grant-date estimated fair value of each award. The Company accounts for all restricted stock granted to Directors as equity-classified awards. The Company recognized stock-based compensation expense in the following line items of the Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~December 31, 2018~~June 30, 2019 and ~~2017:~~2018:

	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended June 30,
	2018		2017		2018		2017		2019		2018
	(In thousands)								(In thousands)
Component of income before income taxes:
Cost of goods sold	$	84	$	45	$	228	$	135	$	112	$	62
Selling expenses		48		27		134		79		56		36
General and administrative expenses		1,526		1,568		4,667		4,926		1,673		1,461
Total stock-based compensation expense	$	1,658	$	1,640	$	5,029	$	5,140	$	1,841	$	1,559

The following table summarizes stock-based compensation expense by award type for the three ~~and nine~~ months ended ~~December 31, 2018~~June 30, 2019 and ~~2017:~~2018:

	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended June 30,
	2018		2017		2018		2017		2019		2018
	(In thousands)								(In thousands)
Stock-based compensation expense:
Equity-classified Stock Options	$	516	$	898	$	2,084	$	2,991	$	551	$	773
Restricted Stock		863		430		2,169		1,158		642		543
Performance Units										372		—
Non-Employee Directors		279		312		776		991		276		243
Total stock-based compensation expense	$	1,658	$	1,640	$	5,029	$	5,140	$	1,841	$	1,559

On May 24, 2017, the Board of Directors approved the 2017 Omnibus Incentive Plan (the “2017 Incentive Plan”) which was approved by the Company’s stockholders on July 17, 2017. The 2017 Incentive Plan provides for the issuance of a maximum of 3.5 million shares of the Company’s common stock for awards made thereunder, which awards may consist of stock options, restricted stock, restricted stock units, stock appreciation rights, phantom stock, cash-based awards, performance awards (which may take the form of performance cash, performance units or performance shares) or other stock-based awards.

During the ~~nine~~three months ended ~~December 31, 2018,~~June 30, 2019, the Company granted 0.1 million shares of restricted stock with a grant date fair value of ~~$3.6~~$3.3 million.

Performance Units - In addition, during the ~~nine~~three months ended ~~December 31, 2018,~~June 30, 2019, the Company granted 0.1 million performance units, subject to performance and services conditions. The grant date fair value of the performance units was ~~$3.0~~$3.4 million, based on the market price of the Company’s common stock at the date of the grant. For the performance units, 50% of the award is based upon the achievement of certain levels of Return on Invested Capital for the performance period and 50% is based upon the achievement of certain levels of Free Cash Flow for the performance period. The performance units have a 3-year performance period from April 1, ~~2018~~2019 through March 31, ~~2021.~~2022. The performance units, and any accrued dividend equivalents, will be settled in shares of the Company’s common stock, if the applicable performance and service conditions are satisfied.

Options –- During the ~~nine~~three months ended ~~December 31, 2018,~~June 30, 2019, the Company granted ~~0.2~~0.3 million nonqualified stock options under the 2017 Incentive Plan. The grant date fair value of the nonqualified stock options was ~~$2.0~~$2.7 million. The Company estimates the fair value of stock options using a Black-Scholes option-pricing model. The following table summarizes the assumptions used in estimate the fair value of stock-options during the ~~nine~~three months ended ~~December 31, 2018:~~June 30, 2019:

The Company operates its business in two distinct operating and reportable segments based on the markets it serves: “Domestic” and “International.” The Chief Operating Decision Maker ~~(“CODM”)~~ evaluates segment reporting based on Net sales and Segment Adjusted EBITDA. The Company calculates Segment Adjusted EBITDA as net income or loss before interest, income taxes, depreciation and amortization, stock-based compensation expense, non-cash charges and certain other expenses. Beginning April 1, 2018, the Company revised its allocation of allowances for returns, rebates, and discounts between Pipe and Allied Products for segment reporting purposes. Prior to April 1, 2018, the Company allocated substantially all returns, rebates, and discounts to Pipe net sales. These changes did not impact the Company’s previously reported consolidated financial results. The prior period segment results and related disclosures have been recast to conform to the current year presentation under the new allocation methodology. The following table sets forth reportable segment information with respect to the amount of Net sales contributed by each class of similar products for the periods presented:

	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended June 30,
	2018		2017		2018		2017		2019		2018
	(In thousands)								(In thousands)
Domestic
Pipe	$	196,675	$	198,713	$	688,025	$	683,512	$	262,121	$	242,026
Allied Products		82,504		78,159		284,921		264,741		112,254		100,472
Total domestic		279,179		276,872		972,946		948,253		374,375		342,498
International
Pipe		29,580		33,231		108,036		101,560		29,284		34,448
Allied Products		9,354		10,729		31,533		30,427		10,049		10,901
Total international		38,934		43,960		139,569		131,987		39,333		45,349
Total Net sales	$	318,113	$	320,832	$	1,112,515	$	1,080,240	$	413,708	$	387,847

The following sets forth certain additional financial information attributable to the reportable segments for the periods presented:

	Domestic		International			Total			Domestic		International			Total
	(In thousands)								(In thousands)
For the nine months ended December, 2018
For the three months ended June 30, 2019
Net sales									$	374,375	$	39,333		$	413,708
Segment Adjusted EBITDA										74,328		5,968			80,296
Interest expense										5,188		76			5,264
Income tax expense										17,430		4,940			22,370
Depreciation and amortization										14,803		1,891			16,694
Equity in net income of unconsolidated affiliates										—		(434	)		(434	)
Capital expenditures										8,469		1,254			9,723
For the three months ended June 30, 2018
Net sales	$	972,946	$	139,569		$	1,112,515		$	342,498	$	45,349		$	387,847
Segment Adjusted EBITDA		175,831		19,267			195,098			68,832		6,311			75,143
Interest expense		13,812		216			14,028			3,757		45			3,802
Income tax expense		26,660		2,308			28,968			13,257		1,027			14,284
Depreciation and amortization		47,281		5,631			52,912			15,953		1,874			17,827
Equity in net loss of unconsolidated affiliates		—		225			225			—		133			133
Capital expenditures		28,211		2,919			31,130			5,881		993			6,874
For the nine months ended December, 2017
Net sales	$	948,253	$	131,987		$	1,080,240
Segment Adjusted EBITDA		167,352		15,876			183,228
Interest expense		12,363		257			12,620
Income tax expense		12,583		3,229			15,812
Depreciation and amortization		49,725		6,068			55,793
Equity in net loss (income) of unconsolidated affiliates		1,607		(2,103	)		(496	)
Capital expenditures		33,601		1,523			35,124

The following sets forth certain additional financial information attributable to the reportable segments as of the periods presented:

	December 31, 2018			March 31, 2018			June 30, 2019			March 31, 2019
	(In thousands)						(In thousands)
Investments in unconsolidated affiliates
International	$	10,007		$	12,343		$	10,891		$	10,467
Total	$	10,007		$	12,343		$	10,891		$	10,467
Total identifiable assets
Domestic	$	892,658		$	904,718		$	945,000		$	918,806
International		126,474			142,822			130,300			128,085
Eliminations		(12,092	)		(4,298	)		(6,885	)		(4,732	)
Total	$	1,007,040		$	1,043,242		$	1,068,415		$	1,042,159

The following reconciles net (loss) income to segment adjusted EBITDA for the periods presented:

For the Three Months Ended December 31,

2018

2017

Domestic

International

Domestic

International

(In thousands)

Reconciliation of Segment Adjusted EBITDA:

Net income

$
13,333

$
3,217

$
29,755

$
3,460

Depreciation and amortization

15,690

1,859

15,804

2,048

Interest expense

5,621

74

3,007

79

Income tax expense (benefit)

1,885

605

(9,117
)

1,746

Segment EBITDA

36,529

5,755

39,449

7,333

Derivative fair value adjustments

1,067

—

(145
)

—

Foreign currency transaction gains

—

(423
)

—

(430
)
Loss (gain) on disposal of assets and costs from exit
   and disposal activities

89

55

1,940

(16
)
Unconsolidated affiliates interest, tax, depreciation
   and amortization^(a)

—

587

315

322

Contingent consideration remeasurement

(8
)

—

1

—

Stock-based compensation expense

1,658

—

1,640

—

ESOP deferred stock-based compensation

2,724

—

2,737

—

Executive retirement expense

50

—

73

—

Restatement-related costs^(b)

(742
)

—

888

—

Legal settlement

—

—

1,800

—

Transaction costs^(c)

83

—

92

—

Strategic growth and operational
   improvement initiatives^(d)

1,010

—

—

—

Segment Adjusted EBITDA

$
42,460

$
5,974

$
48,790

$
7,209

	For the Three Months Ended June 30,
	2019						2018
	Domestic			International			Domestic			International
	(In thousands)
Reconciliation of Segment Adjusted EBITDA:
Net (loss) income	$	(225,291	)	$	(2,160	)	$	30,589		$	3,062
Depreciation and amortization		14,803			1,891			15,953			1,874
Interest expense		5,188			76			3,757			45
Income tax expense		17,430			4,940			13,257			1,027
Segment EBITDA		(187,870	)		4,747			63,556			6,008
Loss on disposal of assets and costs from exit and disposal activities		435			272			1,009			95
ESOP and stock-based compensation expense		7,425			—			5,580			—
ESOP special dividend compensation^(a)		246,752			—			—			—
Transaction costs^(b)		4,207			38			256			—
Strategic growth and operational improvement initiatives^(c)		2,195			—			—			—
Other adjustments^(d)		1,184			911			(1,569	)		208
Segment Adjusted EBITDA	$	74,328		$	5,968		$	68,832		$	6,311

~~Dividends~~Acquisition of Infiltrator - On July 31, 2019 (the “Closing Date”), the Company completed its Acquisition of IWT pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated July 31, 2019. IWT manufactures and sells wastewater systems for homes and provides drainage chambers for septic and storm water management. The Acquisition will combine the Company's industry leading position in stormwater management with IWT's leading platform in onsite septic waste management. The Merger Agreement was funded through the new Senior Secured Credit Facilities as further described below.

The following table summarizes the preliminary consideration paid, net of cash acquired. The amounts below are preliminary and are subject to closing adjustments as outlined in the Merger Agreement.

The following table summarizes the consideration paid and the preliminary purchase price allocation of the assets acquired and liabilities assumed. Due to the recent closing of the Acquisition, on ~~Common Stock~~-July 31, 2019, the purchase price allocation for assets acquired and liabilities assumed is preliminary and will be finalized when valuations are complete and final assessments of the fair value of acquired assets and assumed liabilities are completed. Such finalizations may result in material changes from the preliminary purchase price allocations. The Company’s estimates and assumptions are subject to change during the measurement period (up to one year from the Closing Date), as the Company finalizes the valuations of assets acquired and liabilities assumed.

The preliminary goodwill of $578.7 million represents the excess of consideration transferred over the preliminary fair value of assets acquired and liabilities assumed and is attributable to expected revenue synergies, as well as operating efficiencies and cost savings. The Company does not expect any of this goodwill to be deductible for income tax purposes and is assessing the impact of the Acquisition on the Company’s reportable segments.

The preliminary purchase price excludes transaction costs. During the ~~fourth quarter of fiscal~~three months ended June 30, 2019, the Company ~~declared~~incurred $4.2 million of transaction costs related to the Acquisition such as legal, accounting, valuation and other professional services. These costs are included in general and administrative expenses in the condensed consolidated statements of operations and comprehensive income.

The identifiable intangible assets recorded in connection with the closing of the Acquisition are based on preliminary valuations include customer relationships, patents and developed technology, and tradename and trademarks totaling $475.0 million. Customer relationships are expected to be amortized using an accelerated method over an estimated useful life of 15 years. Patents and developed technology and tradename and trademarks are expected to be amortized on a straight-line basis over the respective useful lives of 10 and 20 years.

The unaudited pro forma information for the three months ended June 30, 2019 and 2018 presented below includes the effects of the Acquisition as if it had been consummated as of April 1, 2018, with adjustments to give effect to pro forma events that are directly attributable to the Acquisition. Adjustments include those related to the amortization of acquired intangible assets, increases in interest expense due to additional borrowings incurred to finance the Acquisition, transaction costs, the elimination of transactions between the Company and IWT and the estimated tax impacts thereof. The three months ended June 30, 2019 supplemental pro forma earnings were adjusted to exclude transaction cost of $4.5 million incurred in the three months ended June 30, 2019. The June 30, 2018 supplemental pro forma earnings were adjusted to include these charges and an additional $12.5 million of transaction costs. The unaudited pro forma information does not reflect any operating efficiency or potential cost savings that could result from the

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 ~~close~~Credit Agreement) or at a Eurocurrency Rate (as defined in the Credit Agreement), plus the applicable margin as set forth therein from time to time. In the case of ~~business~~the Revolving Credit Facility, the applicable margin is based on ~~March 1, 2019.~~the Company’s consolidated senior secured net leverage ratio (as defined in the Credit Agreement). All borrowings under the Term Loan Facility used to finance the Merger Consideration as described above initially bear interest at a Eurocurrency Rate applicable to Eurocurrency Loans (as defined in the Credit Agreement) denominated in U.S. Dollars. Beginning 53 days after the Closing Date, the applicable margin for the Term Loan Facility will be increased by 25 basis points every thirty days following the Closing Date until the earlier of (i) the Marketing Commencement Date (as defined in the Credit Agreement) or (ii) 113 days after the Closing Date.

The Company has agreed to secure all of its obligations under the Credit Agreement by granting a first priority lien on substantially all of its assets (subject to certain exceptions and limitations), and each of Stormtech, LLC, Advanced Drainage of Ohio, Inc. and Infiltrator Water Technologies, LLC (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).

Repayment of Prudential Senior Notes - On July 29, 2019, the Company repaid in full all of its and its subsidiaries indebtedness and other obligations totaling $104.4 million under that certain Second Amended and Restated Private Shelf Agreement, dated as of June 22, 2017 (as amended the “Shelf Note Agreement”) of the Company’s Senior Notes (“Senior Notes”), by and among the Company, as issuer, the guarantors from time to time a party thereto, PGIM, Inc., as a purchaser and the other purchasers from time to time a party thereto (the “Shelf Noteholders”). The Company repaid the outstanding indebtedness under the Shelf Note Agreement using borrowings from the PNC Credit Agreement as in effect as of July 29, 2019. Concurrently with the repayment, the Shelf Noteholders authorized and directed PNC Bank, National Association, in its capacity as Collateral Agent (as defined in the Shelf Note Agreement) to release the security interests and liens securing the Shelf Note Agreement and the Shelf Note Agreement was terminated.

Repayment of PNC Credit Agreement - On the Closing Date, using borrowings of the new Term Loan Facility the Company repaid in full all of its and its subsidiaries indebtedness and other obligations totaling $239.2 million under the PNC Credit Agreement. Concurrently with the repayment, all security interests and liens held by the Collateral Agent (as defined in the PNC Credit Agreement) securing the PNC Credit Agreement were terminated and released and the PNC Credit Agreement was terminated.

Unless the context otherwise indicates or requires, as used in this Quarterly Report on Form 10-Q, the terms “we,” “our,” “us,” “ADS” and the “Company” refer to Advanced Drainage Systems, Inc. and its directly- and indirectly-owned subsidiaries as a combined entity, except where it is clear that the terms mean only Advanced Drainage Systems, Inc. exclusive of its subsidiaries.

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, ~~2019~~2020 refers to fiscal ~~2019,~~2020, which is the period from April 1, ~~2018~~2019 to March 31, ~~2019.~~2020.

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our Condensed Consolidated Financial Statements and related footnotes included elsewhere in this Quarterly Report on Form 10-Q and with the audited Consolidated Financial Statements included in our Fiscal ~~2018~~2019 Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on May 30, ~~2018.~~2019. In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. 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 in the forward-looking statements. For more information, see the section below entitled “Forward Looking Statements.”

We consolidate ~~all of~~ our joint ventures for purposes of GAAP, except for our South American Joint ~~Venture and our former joint venture, Tigre-ADS USA.~~Venture.

We are the leading manufacturer of high performance thermoplastic corrugated pipe, providing a comprehensive suite of water management products and superior drainage solutions for use in the underground construction and infrastructure marketplace. Our innovative products are used across a broad range of end markets and applications, including non-residential, residential, agriculture and infrastructure applications. We have established a leading position in many of these end markets by leveraging our national sales and distribution platform, our overall product breadth and scale and our manufacturing excellence. In the United States, our national footprint combined with our strong local presence and broad product offering make us the leader in an otherwise highly fragmented sector comprised of many smaller competitors. We believe the markets we serve in the United States represent approximately $11 billion of annual revenue opportunity. In addition, we believe the increasing acceptance of thermoplastic pipe products in international markets represents an attractive growth opportunity.

Our products are generally lighter, more durable, more cost effective and easier to install than comparable alternatives made with traditional materials. Following our entrance into the non-residential construction market with the introduction of N-12 corrugated polyethylene pipe in the late 1980s, our pipe products have been displacing products made with traditional materials, such as reinforced concrete, corrugated steel and polyvinyl chloride (“PVC”), across an ever expanding range of end markets. This has allowed us to consistently gain market share and achieve above-market growth throughout economic cycles. We expect to continue to drive conversion to our products from traditional materials as contractors, civil design engineers and municipal agencies increasingly acknowledge the superior physical attributes and compelling value proposition of our thermoplastic products. In addition, we believe that overall demand for our products will benefit as the regulatory environment continues to evolve.

Our broad product line includes HDPE pipe, PP pipe and related water management products. Building on our core drainage businesses, we have aggressively pursued attractive ancillary product categories such as storm and septic chambers, PVC drainage structures, fittings and filters, and water quality filters and separators. We refer to these ancillary product categories as Allied Products. Given the scope of our overall sales and distribution platform, we have been able to drive growth within our Allied Products and believe there are significant growth opportunities going forward.

~~In fiscal 2018, we initiated restructuring activities designed~~Acquisition of Infiltrator

On July 31, 2019, the Company, Ocean Sub, Inc., a wholly-owned subsidiary of the Company (the “Merger Sub”), IWT and 2461461 Ontario Limited, entered into Merger Agreement, pursuant to ~~improve our cost structure, including~~which Merger Sub merged with and into Infiltrator, with Infiltrator continuing as the surviving corporation and a wholly-owned subsidiary of the Company. The closing ~~underutilized manufacturing facilities, reducing headcount and eliminating nonessential costs. These activities will continue throughout fiscal 2019.~~ of the Merger took place simultaneously upon the Closing Date.

The Company ~~closed one and three manufacturing facilities~~paid aggregate purchase price of approximately $1,080.0 million billion in the nine months ended December 31, 2018 and 2017, respectively. The following table summarizes the restructuring activity included in Loss on disposal of assets and costs from exit and disposal activities recorded during the three and nine months ended December 31, 2018 and 2017:

~~The following table summarizes the line items of the Condensed Consolidated Statements of Operations where the expenses above would have been recorded to absent of a restructuring program:~~

~~The restructuring costs above represent one-time expenses and are not indicative of expected costs or cost savings in future periods.~~

~~In the third quarter of fiscal 2019, we began incurring professional fees~~cash in connection with ~~strategic growth~~the Merger, net of cash acquired of $48.5 million, subject to certain post-closing purchase price adjustments as described in the Merger Agreement. Each holder of vested and ~~operational improvement initiatives. These initiatives include market feasibility assessments, acquisition strategies, operational improvement initiatives,~~unexercised Infiltrator stock options outstanding as of the Closing Date received cash in an amount equal to per share cash portion of Merger Consideration in excess of the applicable exercise price per share of such options, subject to adjustment. The Company financed the Merger Consideration with borrowings under the Company’s new credit agreement, which ~~include evaluation~~replaced the Company’s existing PNC Credit Agreement and Senior Notes, as further described below.

The Merger Agreement contains customary representations, warranties and covenants from Infiltrator, Merger Sub and the Company, which representations and warranties do not survive the consummation of ~~our manufacturing network,~~the Merger. The Company has obtained a representation and ~~improvement initiatives~~warranty insurance policy that will provide a source of recourse for breaches of the representations and warranties of Infiltrator contained in the Merger Agreement, subject to a retention amount, exclusions, policy limits and certain other terms and conditions.

On July 31, 2019, the Company entered into the Credit Agreement by and among the Company, as borrower, Barclays Bank PLC, as administrative agent, the several lenders from time to time party thereto, Barclays Bank PLC and Morgan Stanley Senior Funding, Inc., as joint lead arrangers and joint bookrunners

The Credit Agreement provides for the Term Loan Facility in an initial aggregate principal amount of $1.3 billion, the Revolving Facility in an initial aggregate principal amount of up to $350 million, the L/C Facility in the initial aggregate available amount of up to $50 million, as a sublimit of such Revolving Facility and a swing line sub-facility in the aggregate available amount of up to $50 million, as a sublimit of the Revolving Facility.

On the Closing Date, the Company borrowed under the Credit Agreement which was used to (i) finance the Merger Consideration paid in connection with the closing of the Merger, (ii) and repay the total outstanding amount as of the Closing Date under the Company’s PNC Credit Agreement, (iii) repay outstanding amounts of existing indebtedness incurred by IWT under its outstanding credit facility in effect prior to the Acquisition, and (iv) pay certain transaction fees and expenses associated with the Acquisition and the Credit Agreement.

Additional information with regard to the Credit Facility and its terms is set forth in the Company’s Current Report on Form 8-K filed on August 1, 2019 and as set forth below under “Liquidity and Capital Resources.”

On July 29, 2019, the Company repaid in full all of its and its subsidiaries indebtedness and other obligations totaling $104.4 million under the Shelf Note Agreement, dated as of June 22, 2017, by and among the Company, as issuer, the guarantors from time to time a party thereto, PGIM, Inc., as a purchaser and the other purchasers from time to time a party thereto. The Company repaid the outstanding indebtedness under the Shelf Note Agreement using borrowings from the PNC Credit Agreement with PNC Bank, National Association, as administrative agent, and various ~~operational support functions.~~financial institutions party thereto as in effect as of July 29, 2019. Concurrently with the repayment, all security interests and liens securing the Shelf Note Agreement were terminated and released, and the Shelf Note Agreement was terminated. Additional information with regard to the Credit Facility and its terms is set forth in the

Company’s Current Report on Form 8-K filed on August 1, 2019 and as set forth below under “— Liquidity and Capital Resources.”

On the Closing Date, using borrowings of the new Term Loan Facility, the Company repaid in full all of its and its subsidiaries indebtedness and other obligations totaling $239.2 under the PNC Credit Agreement. Concurrently with the repayment, all security interests and liens securing the PNC Credit Agreement were terminated and released and the PNC Credit Agreement was terminated.

Three months ended ~~December 31, 2018~~June 30, 2019 Compared ~~With~~with three months ended ~~December 31, 2017~~June 30, 2018

The following table summarizes our operating results as a percentage of net sales that have been derived from our Condensed Consolidated Financial Statements for the three months ended ~~December 31, 2018~~June 30, 2019 and ~~2017.~~2018. We believe this presentation is useful to investors in comparing historical results.

	For the Three Months Ended December 31,						For the Three Months Ended June 30,
	2018			2017			2019			2018
Consolidated Statements of Operations data:
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of goods sold		77.2			75.7			74.3			74.3
Cost of goods sold - ESOP special dividend compensation								40.8			—
Gross profit		22.8			24.3			(15.0	)		25.7
Selling		7.3			7.1			6.4			6.2
General and administrative		7.0			7.4			7.6			5.5
Selling, general and administrative - ESOP special dividend compensation								18.9			—
Loss on disposal of assets and costs from exit and disposal activities		-			0.6			0.2			0.3
Intangible amortization		0.6			0.6			0.4			0.5
Income from operations		7.8			8.5
(Loss) income from operations								(48.4	)		13.2
Interest expense		1.8			1.0			1.3			1.0
Derivative loss (gains) and other expense (income), net		0.2			(0.3	)
Income before income taxes		5.8			7.8
Income tax expense (benefit)		0.8			(2.3	)
Derivative gains and other income, net								—			(0.2	)
(Loss) income before income taxes								(49.7	)		12.4
Income tax expense								5.4			3.7
Equity in net (income) loss of unconsolidated affiliates		(0.1	)		(0.2	)		(0.1	)		—
Net income		5.2			10.4
Less: net income attributable to noncontrolling interest		0.2			0.3
Net income attributable to ADS		5.0	%		10.0	%
Net (loss) income								(55.0	)		8.7
Less: net (loss) income attributable to noncontrolling interest								(0.3	)		0.4
Net (loss) income attributable to ADS								(54.7	%)		8.3	%

Net sales - Net sales ~~were $318.1 million in the three months ended December 31, 2018, decreasing $2.7 million, or 0.8%,~~increased over the comparable period in fiscal ~~2018.~~2019.

	For the Three Months Ended December 31,										For the Three Months Ended June 30,
	2018		2017		$ Variance			% Variance			2019		2018		$ Variance			% Variance
	(In thousands)										(In thousands)
Domestic
Pipe	$	196,675	$	198,713	$	(2,038	)		(1.0	%)	$	262,121	$	242,026	$	20,095			8.3	%
Allied Products		82,504		78,159		4,345			5.6	%		112,254		100,472		11,782			11.7	%
Total domestic		279,179		276,872		2,307			0.8	%		374,375		342,498		31,877			9.3	%
International
Pipe		29,580		33,231		(3,651	)		(11.0	%)		29,284		34,448		(5,164	)		(15.0	%)
Allied Products		9,354		10,729		(1,375	)		(12.8	%)		10,049		10,901		(852	)		(7.8	%)
Total international		38,934		43,960		(5,026	)		(11.4	%)		39,333		45,349		(6,016	)		(13.3	%)
Total net sales	$	318,113	$	320,832	$	(2,719	)		(0.8	%)	$	413,708	$	387,847	$	25,861			6.7	%

Domestic net sales increased ~~$2.3 million, or 0.8%,~~ in the three months ended ~~December 31, 2018,~~June 30, 2019, over the comparable period in the previous fiscal year. Our domestic pipe sales ~~decreased by $2.0 million, or 1.0%, which~~increase was primarily attributable to a ~~$7.3~~$18.3 million ~~decrease~~increase in pipe ~~volume. This decrease was offset by~~volume and price increases and changes in product mix of ~~$3.7~~$1.2 million. Allied Product sales increased ~~$4.3~~by $11.8 million, or ~~5.6%~~11.7%.

International net sales decreased ~~$5.0~~$6.0 million, or ~~11.4%~~13.3%, in the three months ended ~~December 31, 2018~~June 30, 2019 over the comparable period in the previous fiscal year. Our international pipe sales decreased by ~~$3.7~~$5.2 million, or ~~11.0%~~15.0%, which was primarily attributable to volume decreases. In addition, Allied Product sales decreased ~~$1.4~~$0.9 million.

Cost of goods sold and Gross profit - Cost of goods sold increased by ~~$2.7~~$19.1 million, or ~~1.1%~~6.6%, Cost of goods sold - ESOP special dividend compensation increased by $168.6 million and gross profit decreased by ~~$5.4~~$161.8 million, or ~~7.0%~~162.4%, in the three months ended ~~December 31, 2018~~June 30, 2019 over the comparable period in the previous fiscal year.

	For the Three Months Ended December 31,										For the Three Months Ended June 30,
	2018		2017		$ Variance			% Variance			2019			2018		$ Variance			% Variance
	(In thousands)										(In thousands)
Gross Profit
Domestic	$	64,630	$	69,880	$	(5,250	)		(7.5	%)
Net sales											$	374,375		$	342,498
Cost of goods sold												275,638			251,063		24,575			9.8	%
Cost of goods sold - ESOP special dividend compensation												168,610			—		168,610			100.0	%
Domestic gross profit												(69,873	)		91,435		(161,308	)		(176.4	%)
International		7,769		7,946		(177	)		(2.2	%)
Net sales												39,333			45,349
Cost of goods sold												31,618			37,093		(5,475	)		(14.8	%)
International gross profit												7,715			8,256		(541	)		(6.6	%)
Total gross profit	$	72,399	$	77,826	$	(5,427	)		(7.0	%)	$	(62,158	)	$	99,691	$	(161,849	)		(162.4	%)

The decrease in domestic gross profit of ~~$5.3~~$161.3 million, or ~~7.5%~~176.4%, was primarily due to the ESOP special dividend compensation expense from the special dividend of $168.6 million allocated to Cost of goods sold. The decrease in gross profit due to the ESOP special dividend compensation expense was partially offset by the gross profit impact of the increased net sales discussed above. The increase in net sales was partially offset by increased labor and overhead costs of $18.7 million and increased material and transportation costs of ~~$6.3~~$5.9 million. ~~This gross profit decrease was partially offset by decreased labor and overhead costs and the increased sales discussed above.~~

International gross profit decreased ~~$0.2~~$0.5 million, or ~~2.2%~~6.6%, in the three months ended ~~December 31, 2018~~June 30, 2019 compared to the same period in the previous fiscal year. The decrease is primarily due to the gross profit impact of the decreased net sales discussed above.

Selling expenses - As a percentage of net sales, selling expenses were relatively flat at ~~7.3%~~6.4% in the three months ended ~~December 31, 2018~~June 30, 2019 compared to ~~7.1%~~6.2% in three months ended ~~December 31, 2017.~~June 30, 2018.

General and administrative expenses - General and administrative expenses for the three months ended ~~December 31, 2018 decreased $1.7~~June 30, 2019 increased $10.1 million from the prior year period. The ~~decrease~~increase was primarily due to ~~a $1.8~~an increase of $4.0 million ~~legal settlement~~ in transaction costs, $2.2 million of strategic growth and operational improvement initiatives expenses, $1.7 million of expenses related to our investigation into our consolidated joint venture and partially offset by $1.2 million of insurance proceeds received in fiscal 2019 that did not recur.

Selling, general and administrative expenses - ESOP special dividend compensation - In the ~~three months ended December 31, 2017.~~first quarter of fiscal 2020, we recorded $78.1 million of ESOP compensation expense due to the special dividend. See “Note 8. Net Income Per Share and Stockholders’ Equity” for additional information on the special dividend.

Loss on disposal of assets and costs from exit and disposal activities – - In the three months ended ~~December 31, 2018,~~ ~~we recorded $0.4 million of expense related to restructuring activities. In addition,~~ June 30, 2019, we recorded a ~~gain~~loss on the sale of property, plant and equipment of approximately ~~$0.3~~$0.7 million. See “Note 2. Loss on Disposal of Assets and Costs from Exit and Disposal Activities” for additional discussion.

Intangible amortization - Intangible amortization remained relatively flat as a percentage of net sales.

Interest expense - Interest expense increased ~~$2.6~~$1.5 million in the three months ended ~~December 31, 2018~~June 30, 2019 compared to the same period in the previous fiscal year, primarily due to a $1.8 million unrealized loss on the interest rate swap.

Derivative ~~loss (gains)~~gains and other ~~expense (income),~~income, net - Derivative ~~loss (gains)~~gains and other ~~expense (income)~~income decreased by ~~$1.6~~$0.7 million for the three months ended ~~December 31, 2018~~June 30, 2019 compared to the same period in the previous fiscal year. The decrease is primarily due to changes in realized and unrealized losses on diesel fuel option collar ~~contracts.~~contracts in fiscal 2019.

Income tax expense ~~(benefit)~~ - For the three months ended ~~December 31,~~June 30, 2019 and 2018, ~~and 2017,~~ the effective tax rates were ~~13.4%~~(10.9%) and ~~(29.4%)~~29.7%, respectively. The change in the effective tax rate was primarily due to a discrete income tax event related to stock appreciation from the ~~impact of~~ ~~Tax Act items not affecting the current year and certain other discrete items~~.additional ESOP shares allocated. See “Note ~~11.~~12. Income Taxes” for additional information.

~~Equity in net (income) loss of unconsolidated affiliates -~~ Equity in net (income) loss of unconsolidated affiliates represents our proportionate share of income or loss attributed to our unconsolidated joint venture in which we have significant influence, but not control, over operations. The Equity in net (income) loss of unconsolidated affiliates

decreased by $0.3 million for the three months ended December 31, 2018 as compared to the same period in the previous fiscal year. The decrease is primarily the result of the $1.9 million gain recognized as a result of the contribution of outstanding receivables we made to the South American Joint Venture in the three months ended December 31, 2017. This decrease was partially offset by the disposal of Tigre-ADS USA in April 2018. We recognized a $1.0 million loss representing our proportionate share of Tigre-ADS USA loss in the three months ended December 31, 2017.

~~Net income attributable to noncontrolling interest -~~ Net income attributable to noncontrolling interest decreased by $0.4 million for the three months ended December 31, 2018 compared to the same period in the previous fiscal year primarily due to the acquisition of the noncontrolling interest in BaySaver.

~~Nine months ended December 31, 2018 Compared With nine months ended December 31, 2017~~

The following table summarizes our operating results as a percentage of net sales that have been derived from our Condensed Consolidated Financial Statements for the nine months ended December 31, 2018 and 2017. We believe this presentation is useful to investors in comparing historical results

~~Net sales -~~ ~~Net sales were $1,112.5 million in the nine months ended December 31, 2018, increasing $32.3 million, or 3.0%, over the comparable period in~~ ~~the previous fiscal year~~.

Domestic net sales increased $24.7 million, or 2.6%, in the nine months ended December 31, 2018, over the comparable period in the previous fiscal year. Our domestic pipe sales increased by $4.5 million, or 0.7%, which was primarily attributable to price increases and changes in product mix of $35.6 million. The increase in pipe is offset by a $30.2 million decrease in pipe volume. Allied Product sales increased $20.2 million, or 7.6%.

International net sales increased $7.6 million, or 5.7%, in the nine months ended December 31, 2018 over the comparable period in the previous fiscal year. International pipe sales increased by $6.5 million, or 6.4%, which is attributable to price increases, changes in product mix and an increase in pipe volume. In addition, Allied Products sales increased $1.1 million, or 3.6%.

~~Cost of goods sold and Gross profit -~~ Cost of goods sold increased by $19.2 million, or 2.3%, and gross profit increased by $13.1 million, or 5.1%, in the nine months ended December 31, 2018 over the comparable period in the previous fiscal year.

~~The increase in domestic gross profit of $6.9 million, or 3.0%, is~~ due to the gross profit impact of the net sales increase discussed above and a decrease in labor and overhead costs of $12.7 million. These increases were partially offset by an increase in material and transportation costs of $20.5 million.

~~International gross profit increased $6.2 million, or 30.1%, in the nine months ended December 31, 2018 compared to the same period in~~ ~~the previous fiscal year, primarily due to the gross profit impact of the net sales increase discussed above offset by an increase in material and transportation costs.~~

~~Selling expenses -~~ ~~As a percentage of net sales, selling expenses remained flat at 6.5% in the nine months ended December 31, 2018 and 2017.~~

~~General and administrative expenses -~~ ~~General and administrative expenses for the nine months ended December 31, 2018 decreased $9.3 million from the prior year period. The decrease was primarily due to a~~ ~~decrease in professional and legal fees, including insurance proceeds, of $5.9 million, and a $1.8 million legal settlement in the three months ended December 31, 2017.~~

~~Loss on disposal of assets and costs from exit and disposal activities -~~ In the nine months ended December 31, 2018, we recorded $1.5 million of expense related to restructuring activities, including closing one underutilized manufacturing facility. In addition, we recorded a loss on other disposals and partial disposals of property, plant and equipment of approximately $0.1 million. See “Note 2. Loss on Disposal of Assets and Costs from Exit and Disposal Activities” for additional discussion.

~~Intangible amortization~~ ~~- Intangible amortization remained flat as a percentage of net sales.~~

~~Interest expense~~ - Interest expense increased $1.4 million in the nine months ended December 31, 2018 compared to the same period in the previous fiscal year, primarily due to a $0.8 million unrealized loss on the interest rate swap.

~~Derivative losses (gains) and other expense (income), net~~ ~~- Derivative losses (gains) and other expense (income), net decreased by $4.4 million for the nine months ended December 31, 2018 compared to the same period in~~ ~~the previous fiscal year.~~ ~~The decrease is primarily due to other non-operating income of $3.5 million for the nine months ended December 31, 2017.~~

~~Income tax expense~~ ~~– For the nine months ended December 31, 2018 and 2017, the Company had effective tax rates of 26.6% and 18.6%, respectively. The increase~~ ~~in the effective tax rate was primarily due to the impact of Tax Act items not affecting the current year and certain other discrete items. See “Note 11. Income Taxes” for additional information.~~

Equity in net (income) loss of unconsolidated affiliates - Equity in net (income) loss of unconsolidated affiliates represents our proportionate share of income or loss attributed to our unconsolidated joint venture in which we have significant influence, but not control, over operations. The Equity in net (income) loss of unconsolidated affiliates ~~decreased to a $0.2 million loss for the nine months ended December 31, 2018 from a~~increased by $0.5 million ~~income~~ for the nine months ended December 31, 2017. The decrease is primarily the result of the $1.9 million gain recognized as a result of the contribution of outstanding receivables we made to the South American Joint Venture in the nine months ended December 31, 2017. ~~This decrease was partially offset by the disposal of Tigre-ADS USA in April 2018. We recognized a $1.6 million loss representing our proportionate share of Tigre-ADS USA loss in~~ the three months ended ~~December 31, 2017.~~June 30, 2019 as compared to the same period in the previous fiscal year.

Net (loss) income attributable to noncontrolling interest - Net (loss) income attributable to noncontrolling interest ~~increased from~~decreased by $2.5 million for the three months ended June 30, 2019 to a net loss of $1.1 million compared to a net income of ~~$1.9~~$1.4 million ~~for~~in the ~~nine months ended December 31, 2017~~same period in the previous fiscal year. The decrease was primarily due to net ~~income of $2.8 million for the nine months ended December 31, 2018. The change is primarily attributable~~loss at ADS Mexicana and due to the ~~disposal~~acquisition of ~~Tigre ADS-USA.~~the noncontrolling interest in BaySaver.

In addition to financial results reported in accordance with GAAP, we have provided the following non-GAAP financial measures: Adjusted EBITDA and Free Cash Flow. These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. However, these measures are not intended to be a substitute for those reported in accordance with GAAP. These measures may be different from non-GAAP financial measures used by other companies, even when similar terms are used to identify such measures.

Adjusted EBITDA - Adjusted EBITDA, a non-GAAP financial measure, has been presented in this Quarterly Report on Form 10-Q as a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We calculate adjusted EBITDA as net income before interest, income taxes, depreciation and amortization, stock-based compensation expense, non-cash charges and certain other expenses.

Adjusted EBITDA is included in this Quarterly Report on Form 10-Q because it is a key metric used by management and our Board of Directors to assess our financial performance. Adjusted EBITDA is 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 adjusted EBITDA 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.

Adjusted EBITDA is not a GAAP measure of our financial performance and should not be considered as an alternative to net (loss) income as a measure of financial performance or cash flows from operations 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. Adjusted EBITDA contains 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 adjusted EBITDA, 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. Our presentation of adjusted EBITDA should not be construed to imply that our future results will be unaffected by any such adjustments. Management compensates for these limitations by relying on our GAAP results in addition to using adjusted EBITDA as a supplemental measurement. Our measure of adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.

The following table presents a reconciliation of Adjusted EBITDA to Net income, the most comparable GAAP measure, for each of the periods indicated.

Three Months Ended
December 31,

Nine Months Ended
December 31,

2018

2017

2018

2017

(In thousands)

Net income

$
16,550

$
33,215

$
79,573

$
69,648

Depreciation and amortization

17,549

17,852

52,912

55,793

Interest expense

5,695

3,086

14,028

12,620

Income tax expense (benefit)

2,490

(7,371
)

28,968

15,812

EBITDA

42,284

46,782

175,481

153,873

Derivative fair value adjustments

1,067

(145
)

1,209

(735
)
Foreign currency transaction (gains) losses

(423
)

(430
)

224

(2,878
)
Loss on disposal of assets and costs from exit
   and disposal activities

144

1,924

1,572

10,468

Unconsolidated affiliates interest, tax, depreciation
   and amortization^(a)

587

637

1,237

2,060

Contingent consideration remeasurement

(8
)

1

(15
)

33

Stock-based compensation expense

1,658

1,640

5,029

5,140

ESOP deferred stock-based compensation

2,724

2,737

11,113

7,946

Executive retirement expense (benefit)

50

73

(228
)

982

Restatement-related (benefit) costs^(b)

(742
)

888

(1,938
)

3,390

Legal settlement

—

1,800

—

1,800

Transaction costs^(c)

83

92

404

1,149

Strategic growth and operational
   improvement initiatives^(d)

1,010

—

1,010

—

Adjusted EBITDA

$
48,434

$
55,999

$
195,098

$
183,228

	Three Months Ended June 30,
	2019			2018
	(In thousands)
Net (loss) income	$	(227,451	)	$	33,651
Depreciation and amortization		16,694			17,827
Interest expense		5,264			3,802
Income tax expense		22,370			14,284
EBITDA		(183,123	)		69,564
Loss on disposal of assets and costs from exit and disposal activities		707			1,104
ESOP and stock-based compensation expense		7,425			5,580
ESOP special dividend compensation^(a)		246,752			—
Transaction costs^(b)		4,245			256
Strategic growth and operational improvement initiatives^(c)		2,195			—
Other adjustments^(d)		2,095			(1,361	)
Adjusted EBITDA	$	80,296		$	75,143

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 Quarterly Report on Form 10-Q 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 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.

The following table presents a reconciliation of free cash flow to Cash flow from operating activities, the most comparable GAAP measure, for each of the periods indicated.

	Nine Months Ended December 31,						Three Months Ended June 30,
	2018			2017			2019			2018
	(In thousands)						(In thousands)
Cash flow from operating activities	$	148,022		$	138,909		$	62,840		$	9,831
Capital expenditures		(31,130	)		(35,124	)		(9,723	)		(6,874	)
Free Cash Flow	$	116,892		$	103,785		$	53,117		$	2,957

Our primary liquidity requirements are working capital, capital expenditures, debt service, and dividend payments for our convertible preferred stock and common stock. We have historically funded, and expect to continue to fund, our operations primarily through internally generated cash flow, debt financings, equity issuance and capital and operating leases. 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.

As of ~~December 31, 2018,~~June 30, 2019, we had ~~$12.3~~$6.9 million in cash that was held by our foreign subsidiaries. Prior to the Tax Act, our intent was to indefinitely reinvest our earnings in foreign subsidiaries with the exception of cash dividends paid by our ADS Mexicana joint venture. As a result of the Tax Act, weWe continue to evaluate our strategy ~~with regard to~~regarding foreign cash, but our earnings in foreign subsidiaries still remain indefinitely reinvested.

As further described below, on July 29, 2019, we repaid in full all of our indebtedness and other obligations totaling $104.4 under our Shelf Note Agreement by using borrowings from the Company’s existing credit facility under the PNC Credit Agreement. Concurrently with the repayment, all security interests and liens securing the Shelf Note Agreement were terminated and released, and the Shelf Note Agreement was terminated.

Thereafter, on the Closing Date, using borrowings of the Term Loan Facility and Revolving Facility, we repaid in full all of our indebtedness and other obligations totaling $239.2 under the PNC Credit Agreement. Concurrently with the repayment, all security interests and liens securing the PNC Credit Agreement were terminated and released and the PNC Credit Agreement was terminated.

On July 31, 2019, the Company entered into the Credit Agreement with Barclays Bank PLC, as administrative agent and the several lenders from time to time party thereto, pursuant to which the Company borrowed under the Credit Agreement which was used to (i) finance the Merger Consideration for the acquisition of Infiltrator, (ii) repay the total outstanding amount under the existing PNC Credit Agreement, (iii) repay outstanding amounts of existing

indebtedness incurred by IWT under its outstanding credit facility in effect prior to the Acquisition, and (iv) pay certain transaction fees and expenses associated with the Acquisition and the Credit Agreement.

As of ~~December 31, 2018,~~June 30, 2019, we had ~~$509.7~~$469.8 million in liquidity, including ~~$19.8~~$9.4 million of cash, ~~$414.9~~$385.4 million in borrowings available under our ~~Revolving~~existing PNC Credit ~~Facility~~Agreement net of ~~$8.6~~$8.4 million of outstanding letters of credit, and $75.0 million under the Senior Notes, described below. All outstanding indebtedness under these borrowings were repaid in full in connection with the establishment of the new Credit Agreement, as further described below. We believe that our cash on hand, together with the availability of borrowings under our ~~Revolving~~new Credit Facility and other financing arrangements and cash generated from operations, will be sufficient to meet our working capital requirements, anticipated capital expenditures, scheduled principal and interest payments on our indebtedness and the dividend payment requirement for our convertible preferred stock for at least the next twelve months.

Working Capital - Working capital decreased to ~~$236.3~~$236.7 million as of ~~December 31, 2018,~~June 30, 2019, from ~~$237.2~~$260.2 million as of March 31, ~~2018.~~2019. The decrease in working capital is primarily due to a decrease in inventory of $34.3 million, an increase of $27.2 million in accounts payable and other accrued liabilities and an increase in accrued income taxes of ~~$39.2 million~~$10.9 million. These increases were partially offset by ~~a $19.4 million decrease~~an increase in accounts receivable ~~and a $17.3 million decrease in inventory.~~of $44.8 million. These changes relate to the seasonality of our business.

Operating Cash Flows - Cash flows provided by operating activities for the ~~nine~~three months ended ~~December 31, 2018~~June 30, 2019 was ~~$148.0~~$62.8 million as compared with cash provided by operating activities of ~~$138.9~~$9.8 million for the ~~nine~~three months

ended ~~December 31, 2017.~~June 30, 2018. Cash flows from operating activities during the ~~nine~~three months ended ~~December 31, 2018~~June 30, 2019 was primarily impacted by ~~increased income from continuing operations offset by~~ changes in working capital.

Investing Cash Flows - During the ~~nine~~three months ended ~~December 31,~~June 30, 2019 and 2018, ~~and 2017,~~ cash used in investing activities was ~~$30.0~~$9.7 million and ~~$31.7~~$7.0 million, respectively. The ~~decrease~~increase in cash used for investing activities was primarily due to ~~decreases~~increases in capital expenditures and purchases of property, plant and equipment through financing. Our capital expenditures for the ~~nine~~three months ended ~~December 31, 2018~~June 30, 2019 were used primarily for new equipment and facility expansions and upgrades.

Financing Cash Flows - During the ~~nine~~three months ended ~~December 31, 2018,~~June 30, 2019, cash used in financing activities was ~~$115.4~~$52.6 million due to ~~net~~the special and quarterly dividend payment of $69.6 million and payments on our ~~Revolving Credit Facility, payments~~finance lease obligations of $6.0 million. These uses were partially offset by $21.8 million of net borrowings on our ~~Senior Notes, dividends paid, payments on our capital lease obligations and the acquisition of noncontrolling interest in BaySaver.~~PNC Credit Agreement. During the ~~nine~~three months ended ~~December 31, 2017,~~June 30, 2018, used in financing activities was ~~$94.5~~$1.6 million due to ~~repayments~~dividends paid and payments on our ~~Revolving Credit Facility, Term Loan and Senior Notes, $7.9 million of repurchases of our common stock under the stock repurchase program,~~finance lease obligations offset by ~~our~~net borrowings on our ~~Senior Notes and Revolving~~PNC Credit ~~Facility associated with the debt refinancing.~~Agreement.

Capital expenditures totaled ~~$31.1~~$9.7 million and ~~$35.1~~$6.9 million for the ~~nine~~three months ended ~~December 31,~~June 30, 2019 and 2018, ~~and 2017,~~ respectively. Our capital expenditures for the ~~nine~~three months ended ~~December 31, 2018~~June 30, 2019 were used primarily to support facility expansions, equipment replacements, our recycled resin initiatives and technology.

We currently anticipate that we will make capital expenditures of approximately ~~$40~~$55 to ~~$50~~$65 million in fiscal year ~~2019.~~2020. Such capital expenditures are expected to be financed using funds generated by operations. As of ~~December 31, 2018,~~June 30, 2019, there were no material contractual obligations or commitments related to these planned capital expenditures.

The Company established the Advanced Drainage Systems, Inc. ESOP (the “ESOP” or the “Plan”) effective April 1, 1993 to enable eligible employees to acquire stock ownership in ADS in the form of redeemable convertible preferred shares. The Plan was funded by an existing tax-qualified profit-sharing retirement plan, as well as a 30-year term loan from ADS. Within 30 days following the repayment of the ESOP loan, which will occur no later than March 2023, the ESOP committee can direct the shares of redeemable convertible preferred stock owned by the ESOP ~~will~~to be converted into shares of the Company’s common stock.

The Company is obligated to make contributions to the Plan, which, when aggregated with the Plan’s dividends, equal the amount necessary to enable the Plan to make its regularly scheduled payments of principal and interest due on its term loan to ADS. Compensation expense is recognized based upon the average annual fair value of the shares during the period which ADS receives payments on the term loan, and the number of ESOP shares allocated to participant accounts.

As disclosed in “Note ~~15.~~16. Employee Benefit Plans” to the Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of our Fiscal ~~2018~~2019 Form 10-K, redeemable convertible preferred stock can convert to common stock upon retirement, disability, death, or vested terminations over the life of the Plan. As stated above, within 30 days following the repayment of the ESOP loan, all redeemable convertible preferred stock will be converted to common stock, which will be no later than March 2023.

The ESOP’s conversion of redeemable convertible preferred stock into common stock will have a meaningful impact on the Company’s net income, net income per share and common shares outstanding. The outstanding shares of common stock would be ~~31%~~30% greater after conversion.

Impact on Net Income – - Following the repayment of the ESOP loan discussed above, the Company will no longer be required to apply the two-class method to determine Net income per share. In addition, the Company would not be

required to recognize the fair value of ESOP deferred compensation attributable to the shares of redeemable convertible preferred shares allocated.

The impact of the ESOP on net income includes the fair value of ESOP deferred compensation attributable to the shares of redeemable convertible preferred stock allocated to employee ESOP accounts during the applicable period, which is a non-cash charge to our earnings and not deductible for income tax purposes.

	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended June 30,
	2018		2017		2018		2017		2019			2018
	(In thousands)								(In thousands)
Net income attributable to ADS	$	15,812	$	32,105	$	76,762	$	67,710
Net (loss) income attributable to ADS									$	(226,356	)	$	32,280
ESOP special dividend compensation										246,752			—
ESOP deferred stock-based compensation		2,724		2,737		11,113		7,946		5,584			4,021

Impact on Common Stock Outstanding – - The repayment of the ESOP loan and related conversion of redeemable convertible preferred shares will have an impact on the number of common shares outstanding. As shares are converted, the number of common shares outstanding will increase.

	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended June 30,
	2018		2017		2018		2017		2019		2018
	(Shares in millions)								(Shares in millions)
Weighted average common shares outstanding		57.1		55.9		56.8		55.5		57.6		56.6
Conversion of redeemable convertible shares		17.7		18.2		17.8		18.4		17.5		17.9

Secured Bank Term Loans - On June 22, 2017, we entered into ~~a Second Amended and Restated~~the PNC Credit Agreement, ~~with PNC,~~ which amends and restates the original agreement dated as of June 12, 2013, to provide us a $550 million ~~Revolving Credit Facility,~~revolving credit facility, which is more fully described in our Fiscal ~~2018~~2019 Form 10-K.

As of ~~December 31, 2018,~~June 30, 2019, the outstanding principal drawn on the ~~Revolving~~PNC Credit ~~Facility~~Agreement was ~~$126.5~~$156.2 million, with ~~$414.9~~$385.4 million available to be drawn on the U.S. facility, net of ~~$8.6~~$8.4 million of outstanding letters of credit. All outstanding indebtedness under the PNC Credit Agreement was repaid in full as of July 30, 2019 in connection with the establishment of the new Senior Secured Credit Facilities with Barclays Bank PLC, as further described below.

ADS Mexicana Revolving Credit Facility - ~~On June 22, 2018, the Company’s $12.0 million Revolving Credit Facility –~~The Company and ADS Mexicana ~~matured. At June 22, 2018, there were no borrowings under the Revolving Credit Facility – ADS Mexicana.~~

~~ADS Mexicana’s Revolving Credit Facility was replaced by~~entered into an Intercompany Revolving Credit Promissory Note (the “Intercompany Note”) with a capacity of $12.0 ~~million.~~million on June 22, 2018. The Intercompany Note matures on June 22, 2022. The Intercompany Note indemnifies the ADS Mexicana joint

venture partner for 49% of any unpaid borrowing. The interest rates under the Intercompany Note are determined by certain base rates or LIBOR rates plus an applicable margin based on the Leverage Ratio. As of ~~December 31, 2018~~June 30, 2019 there were no borrowings under the Intercompany Note.

Fiscal 2019 Amendment to the Secured Bank Term Loans – - On July 9, 2018, the Company amended the ~~Second Amended and Restated~~PNC Credit ~~(the “Credit Agreement”)~~Agreement and the ~~Second Amended and Restated Private~~ Shelf Note Agreement ~~(the “Private Shelf Agreement”)~~ to amend the definition of Consolidated EBITDA and changed the timing of the quarterly rate adjustments. In addition, the amendment to the PNC Credit Agreement clarified the process of a transition to replace LIBOR which is being phased out.

Senior Notes - On December 11, 2009, we entered into a private shelf agreement with Prudential Investment Management Inc., or Prudential, which agreement, as amended and restated on September 24, 2010 and subsequently further amended, provides for the issuance by us of senior secured promissory notes to Prudential or its affiliates from time to time in the aggregate principal amount up to $100 million. On June 22, 2017, we entered into

the ~~Second Amended and Restated Private~~ Shelf Note Agreement ~~with Prudential, which amends and restates the agreement dated as of September 24, 2010,~~ to provide for the issuance of secured senior notes to ~~Prudential or its affiliates~~the Shelf Note Lenders from time to time in the aggregate principal amount of up to $175 million, which is more fully described in our Fiscal ~~2018~~2019 Form 10-K. WeAs of June 30, 2019, we have $75 million available for issuance of senior notes under the ~~private shelf agreement.~~Shelf Note Agreement. At ~~December 31, 2018,~~June 30, 2019, the outstanding principal balance on these notes was $100 million. All outstanding indebtedness under the Shelf Note Agreement was repaid in full as of July 29, 2019, as further described below.

New Senior Secured Credit Facilities - On July 31, 2019, we entered into the Credit Agreement with Barclays Bank PLC, as administrative agent and the several lenders from time to time party thereto. The Credit Agreement provides for up to $1.3 billion as a Term Loan Facility, up to $350 million as a Revolving Facility, up to $50 million as an L/C Facility and up to $50 million, as a sublimit of the Revolving Facility.

On July 31, 2019, the Company borrowed under the Credit Agreement which was used to (i) finance the Merger Consideration paid in connection with the closing of the Merger, (ii) and repay the total outstanding amount as of the Closing Date under the PNC Credit Agreement, (iii) repay outstanding amounts of existing indebtedness incurred by IWT under its outstanding credit facility in effect prior to the Acquisition, and (iv) pay certain transaction fees and expenses associated with the Acquisition and the Credit Agreement.

The Term Loan Facility must be repaid in equal quarterly installments commencing on January 1, 2020 and continuing on the first day of each consecutive April, July, October and January thereafter. To the extent not previously paid, all then-outstanding amounts under the Term Loan Facility are due and payable on the maturity date of the Term Loan Facility, which is seven years from the Closing Date. Borrowings under the Revolving Facility are available beginning on the Closing Date and, to the extent not previously paid, all then-outstanding amounts under the Revolving Facility are due and payable on the maturity date of the Revolving Facility, which is five years from the Closing Date.

The Credit Agreement includes customary representations, warranties, covenants and events of default.

At the option of the Company, borrowings under the Term Loan Facility and under the Revolving Facility (subject to certain limitations) bear interest at either a base rate (as determined pursuant to the Credit Agreement) or at a Eurocurrency Rate (as defined in the Credit Agreement), plus the applicable margin as set forth therein from time to time. In the case of the Revolving Facility, the applicable margin is based on the Company’s consolidated senior secured net leverage ratio (as defined in the Credit Agreement). All borrowings under the Term Loan Facility used to finance the Merger Consideration as described above initially bear interest at a Eurocurrency Rate (as defined in the Credit Agreement). Beginning 53 days after the Closing Date, the applicable margin for the Term Loan Facility will be increased by 25 basis points every thirty days following the Closing Date until the earlier of (i) the Marketing Commencement Date (as defined in the Credit Agreement) or (ii) 113 days after the Closing Date.

The Company has agreed to secure all of its obligations under the Credit Agreement by granting a first priority lien on substantially all of its assets (subject to certain exceptions and limitations), and each of Stormtech, LLC, Advanced Drainage of Ohio, Inc. and Infiltrator Water Technologies, LLC (together with the Company, 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).

The Credit Agreement requires, if the aggregate amount of outstanding exposure under the Revolving Facility exceeds $122,500,000 at the end of any fiscal quarter, the Company to maintain a consolidated senior secured net leverage ratio (commencing with the fiscal quarter ending March 31, 2020) 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, 2021) 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.

Our outstanding debt agreements and instruments contain various restrictive covenants including, but not limited to, limitations on additional indebtedness and capital distributions, including dividend payments. The two primary debt covenants of the ~~amended ADS Revolving~~PNC Credit ~~Facility~~Agreement and Senior Notes include a Leverage Ratio and an Interest Coverage Ratio maintenance covenant. For any relevant period of determination, the Leverage Ratio is calculated by dividing Total Consolidated Indebtedness (funded debt plus guarantees) by Consolidated EBITDA, as defined by the credit facility. The current upper limit is 4.0 times (or 4.25 as of the date of any acquisitions permitted under the amended agreement for which the aggregate consideration is $100.0 million or greater). The Interest Coverage Ratio is calculated by dividing the sum of Consolidated EBITDA by consolidated interest expense. The current minimum ratio is 3.0 times.

For further information, see “Note ~~12.~~13. Debt” to the Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of our Fiscal ~~2018~~2019 Form 10-K. We are in compliance with our debt covenants as of ~~December 31, 2018.~~June 30, 2019.

Our new Credit Agreement also includes covenants, including negative covenants, as further described above.

On August 1, 2019, the Company filed a universal shelf Registration Statement on Form S-3 (the “Registration Statement”) with the SEC in accordance with the Securities Act of 1933, as amended, which has not yet been declared effective. Upon being declared effective, the Registration Statement will register debt securities, common stock, preferred stock, depositary shares, warrants, purchase contracts, units, subscription rights and any combination of the foregoing, for a maximum aggregate offering price of up to $500 million, which may be sold from time to time. The terms of any securities offered under the Registration Statement and intended use of proceeds will be established at the times of the offerings and will be described in prospectus supplements filed with the SEC at the times of the offerings. Once declared effective, the Registration Statement will have a three year term.

Excluding the guarantees of 50% of certain debt of our unconsolidated South American Joint Venture as further discussed in “Note 8.9. Related Party Transactions” to the Condensed Consolidated Financial Statements, we do not have any other off-balance sheet arrangements. As of ~~December 31, 2018,~~June 30, 2019, our South American Joint Venture had

approximately ~~$12.6~~$12.2 million of outstanding debt subject to our guarantees. 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.

With the exception of the accounting pronouncements adopted during fiscal ~~2018~~2020 discussed in “Note 1. Background and Summary of Significant Accounting Policies” and “Note ~~3. Revenue Recognition,~~4. Leases,” there have been no changes in critical accounting policies from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Fiscal ~~2018~~2019 Form 10-K.

This Quarterly Report on Form 10-Q (“Form 10-Q”) includes forward-looking statements. Some of the forward-looking statements can be identified by the use of terms such as “believes,” “expects,” “may,” “will,” “would,” “should,” “could,” “seeks,” “predict,” “potential,” “continue,” “intends,” “plans,” “projects,” “estimates,” “anticipates” or other comparable terms. These forward-looking statements include all matters that are not related to present facts or current conditions or that are not historical facts. They appear in a number of places throughout this Form 10-Q and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our consolidated results of operations, financial condition, liquidity, prospects, growth strategies, and the industries in which we operate and include, without limitation, statements relating to our future performance.

Forward-looking statements are subject to known and unknown risks and uncertainties, many of which are beyond our control. We caution you that forward-looking statements are not guarantees of future performance and that our actual consolidated results of operations, financial condition, liquidity and industry development may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our actual consolidated results of operations, financial condition, liquidity and industry development are consistent with the forward-looking statements contained in this Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors could cause actual results to differ materially from those contained in or implied by the forward-looking statements, including those reflected in forward-looking statements relating to our operations and business, the risks and uncertainties discussed in this Form 10-Q (including under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”), and those described from time to time in our other filings with the SEC. Factors that could cause actual results to differ from those reflected in forward-looking statements relating to our operations and business include:

All forward-looking statements are made only as of the date of this report and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data.

We are subject to various market risks, primarily related to changes in interest rates, credit, raw material supply prices and, to a lesser extent, foreign currency exchange rates. Our financial position, results of operations or cash flows may be negatively impacted in the event of adverse movements in the respective market rates or prices in each of these risk categories. Our exposure in each category is limited to those risks that arise in the normal course of business, as we do not engage in speculative, non-operating transactions. Our exposure to market risk has not materially changed from what we previously disclosed in Part II. Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” of our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2018.~~2019.

The Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) are responsible for evaluating the effectiveness of our disclosure controls and procedures as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”) rules 13a-15(e) and 15d-15(e). The Company’s disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As previously disclosed in our Fiscal 2019 Form 10-K, we concluded that our internal control over financial reporting was not effective based upon the material weakness identified as of March 31, 2019. See “Item 9A - Controls and Procedures” in our Fiscal 2019 Form 10-K. Our CEO and CFO have concluded that the material weakness previously identified in the Fiscal 2019 Form 10-K was still present as of June 30, 2019 (the “Evaluation Date”). Based on ~~those~~the material ~~weaknesses,~~weakness, and the evaluation of our disclosure controls and

procedures, ~~the Company’s~~our CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective as of ~~December 31, 2018.~~the Evaluation Date.

There were no changes in the Company’s internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act that occurred during the three months ended ~~December 31, 2018~~June 30, 2019 that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

As previously disclosed in the Company’s Fiscal 2018 Form 10-K, the Company’s historical accounting practices were the subject of an investigation by SEC’s Division of Enforcement (the “Enforcement Division”), which began in August 2015. That matter was resolved on July 10, 2018 via a settlement between the Company and the SEC. Pursuant to the settlement, the Company consented to the entry of an administrative order without admitting or denying the findings therein. The order required the Company to cease and desist from committing or causing any violations and any future violations of certain provisions of the federal securities laws and the rules promulgated thereunder and to pay a civil monetary penalty of $1.0 million, which payment has been made. The Company previously accrued an expense for the penalty amount during Fiscal 2018.

On July 29, 2015, a putative stockholder class action, Christopher Wyche, individually and on behalf of all others similarly situated v. Advanced Drainage Systems, Inc., et al. (Case No. 1 :1:15-cv-05955-KPF), was commenced in the U.S. District Court for the Southern District of New York (the “District Court”), naming the Company, along with Joseph A. Chlapaty, the Company’s former Chief Executive Officer, and Mark B. Sturgeon, the Company’s former Chief Financial Officer, as defendants and alleging violations of the federal securities laws. An amended complaint was filed on April 28, 2016. The amended complaint alleged that the Company made material misrepresentations and/or omissions of material fact in its public disclosures during the period from July 25, 2014 through March 29, 2016, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. On March 10, 2017, the District Court dismissed plaintiff’s claims against all defendants in their entirety and with prejudice. Plaintiff appealed to the United States Court of Appeals for the Second Circuit, and on October 13, 2017 the District Court’s judgment was affirmed by the Second Circuit. On October 27, 2017, plaintiff filed a petition for rehearing with the Second Circuit. The Second Circuit denied the petition for rehearing on November 28, 2017. On November 27, 2018, the plaintiff filed with the District Court a motion for relief from final judgment and for leave to file an amended complaint, ~~with~~which, the defendants opposed. On July 3, 2019, the District ~~Court. The defendants have opposed~~Court denied the plaintiff’s ~~motion and are awaiting a decision by the District Court.~~motion. While it is reasonably possible that this matter ultimately could be decided unfavorably to the Company, the Company is currently unable to estimate the range of the possible losses, but it could be material.

Please see “Note ~~10.~~11. Commitments and Contingencies,” of the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for more information regarding legal proceedings.

~~Important~~The following risk factors are related to the acquisition of Infiltrator and related financings. Additional important risk factors that could affect our operations and financial performance, or that could cause results or events to differ from current expectations, are described in “Part I, Item 1A — Risk Factors” of our Fiscal ~~2018~~2019 Form 10-K. These factors are further supplemented by those discussed in “Part II, Item 7A — Quantitative and Qualitative Disclosures about Market Risk” of our Fiscal ~~2018~~2019 Form 10-K and in “Part I, Item 3 — Quantitative and Qualitative Disclosures about Market Risk” and “Part II, Item 1 — Legal Proceedings” of this Quarterly Report on Form 10-Q.

We may be unable to successfully integrate our and Infiltrator’s 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 Infiltrator 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 Infiltrator’s 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:

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 Infiltrator and could also apply to our future acquisitions.

Uncertainties associated with our acquisition of Infiltrator 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 Infiltrator could disrupt our and Infiltrator’s 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 Infiltrator. Our and Infiltrator’s 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 Infiltrator’s 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, 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 Infiltrator may suffer if we do not effectively manage our expanded operations following the acquisition.

Following our acquisition of Infiltrator, the size and complexity of our business will increase significantly beyond the current size of either our or Infiltrator’s 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 Infiltrator.

We may not be able to maintain the levels of revenue, earnings or operating efficiency that we and Infiltrator have achieved or might achieve separately. The business and financial performance of Infiltrator 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 Infiltrator has achieved in the past.

The unaudited pro forma financial information related to the acquisition may not accurately reflect our financial position or results of operations.

The unaudited pro forma financial information contained in “Note 15 - Subsequent Events” to the notes to our unaudited financial statements included in this Quarterly Report and the unaudited pro forma financing information included in our Current Report on Form 8-K dated August 1, 2019, was presented for illustrative purposes only and may not be an indication of what our financial position or results of operations would have been had the Merger been completed on the dates indicated. The unaudited pro forma financial information was derived from our audited and unaudited historical financial statements along with those of Infiltrator, and certain adjustments and assumptions were made regarding the combined company after giving effect to the Merger. The assets and liabilities of Infiltrator were measured at fair value based on various preliminary estimates using assumptions that Infiltrator’s management believed to be reasonable utilizing information currently available. The process for estimating the fair value of acquired assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. These estimates and assumptions may be revised as additional information becomes available and as additional analyses are performed. Differences between preliminary estimates in the pro forma financial information and the final acquisition accounting will occur and could have a material impact on the pro forma financial information and the combined company’s financial position and future results of operations. In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect our financial condition or results of operations following the Merger. Any potential decline in our financial condition or results of operations may cause significant variations in the trading price of our common stock following the Merger.

We borrowed under our new Credit Agreement to finance our acquisition of Infiltrator. Any failure by us to comply with operating and financial restrictions and covenants under the new Credit Facility could result in the accelerated maturity of debt obligations, which could materially and adversely affect our liquidity.

In connection with our acquisition of Infiltrator, we replaced our existing PNC Credit Agreement and Senior Notes with the Senior Secured Credit Facilities under the new Credit Agreement, which was used to finance the acquisition of Infiltrator. The new senior credit facility was provided under the new Credit Agreement that contains numerous restrictive covenants that limit our discretion in the operation of our business, which could have a materially adverse effect on our business, financial condition and results of operations. If we are unable to generate sufficient cash flow or otherwise obtain the funds necessary to make required repayments under the Credit Agreement, or if we fail to comply with the requirements of our indebtedness, we could create an event of default under the Credit Agreement. Any default that is not cured or waived could result in the acceleration of the obligations under the Credit Agreement. Any such default which actually causes an acceleration of obligations could have a material adverse effect on our liquidity and financial condition. Additionally, the covenants in the Credit Agreement may restrict the conduct of our business, which could adversely affect our business by, among other things, limiting our ability to take advantage of financings, mergers, acquisitions and other corporate opportunities that may be beneficial to our business. Our ability to comply with covenants contained in the Credit Agreement may be affected by events beyond our control, including prevailing economic, financial and industry conditions.

In February 2017, our Board of Directors authorized the repurchase of up to $50 million of our common stock. Repurchases of common stock will be made in accordance with applicable securities laws. We did not repurchase any shares of common stock during the three months ended ~~December 31, 2018.~~June 30, 2019. As of ~~December 31, 2018,~~June 30, 2019, approximately $42.1 million of common stock may be repurchased under the authorization. The stock repurchase program does not obligate us to acquire any particular amount of common stock and may be suspended or terminated at any time at our discretion.

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	WMS	New York Stock Exchange



PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	Page

	Condensed Consolidated Balance Sheets as of ~~December 31, 2018~~June 30, 2019 and March 31, ~~2018~~2019	1

	Condensed Consolidated Statements of Operations for the three ended June 30, 2019 and ~~nine months ended December 31,~~ 2018 ~~and 2017~~	2

	Condensed Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~December 31,~~June 30, 2019 and 2018 ~~and 2017~~	3

	Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~December 31,~~June 30, 2019 and 2018 ~~and 2017~~	4

	Condensed Consolidated Statements of Stockholders’ Equity and Mezzanine Equity for the ~~nine~~three months ended ~~December 31,~~June 30, 2019 and 2018 ~~and 2017~~	5

	Notes to the Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2425

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3738

Item 4.	Controls and Procedures	3739

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3940

Item 1A.	Risk Factors	3940

Item 2.	Unregistered Sale of Equity Securities	4042

Item 3.	Defaults Upon Senior Securities	4042

Item 4.	Mine Safety Disclosures	4043

Item 5.	Other Information	4043

Item 6.	Exhibits	4144

Signatures		4245

(Amounts in thousands)	Income Statement Classification	2019
Operating lease cost	��
Operating lease expense	Cost of goods sold	$	948
Operating lease expense	General and administrative		90
Short-term lease expense	Cost of goods sold		736
Total operating lease cost		$	1,774
Finance lease cost
Amortization of right-of-use assets	Cost of goods sold		4,554
Amortization of right-of-use assets	General and administrative		356
Interest on lease liabilities	Interest expense		1,159
Total finance lease cost		$	6,069

(Amounts in thousands)	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,038
Operating cash flows from finance leases		1,174
Financing cash flows from finance leases		6,047
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		1,219
Finance leases		296

(Amounts in thousands)	Balance Sheet Classification	2019
Operating leases
Right-of-use assets	Other assets	$	13,203
Current lease liabilities	Other accrued liabilities		3,809
Non-current lease liabilities	Other liabilities		9,407
Total operating lease liabilities		$	13,216
Finance leases
Right-of-use assets	Property, plant and equipment		106,018
Current lease liabilities	Current maturities of finance lease obligations		22,695
Non-current lease liabilities	Long-term finance lease obligations		56,368
Total finance lease liabilities		$	79,063

Weighted average lease term
Operating leases			8.36
Finance leases			11.15
Weighted average discount rate
Operating leases			3.54	%
Finance leases			4.98	%



Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

(Amounts in thousands)	Operating Leases		Capital Leases
2020	$	4,159	$	26,604
2021		2,924		22,507
2022		1,814		18,064
2023		690		11,721
2024		325		7,143
Thereafter		2,236		8,198
Total minimum lease payments	$	12,148	$	94,237
Less: amount representing interest		—		9,565
Present value of net minimum lease payments	$	12,148	$	84,672

		~~Nine~~Three Months Ended ~~December 31,~~June 30,
Common stock price		~~25.75~~$27.44
Expected stock price volatility		~~30.5~~30.9%
Risk-free interest rate		~~2.9~~2.3%
Weighted-average expected option life (years)		6.0
Dividend yield		~~1.2%~~1.3%

	For the Nine Months Ended December 31,
	2018					2017
	Domestic			International		Domestic			International
	(In thousands)
Reconciliation of Segment Adjusted EBITDA:
Net income	$	70,539		$	9,034	$	61,837		$	7,811
Depreciation and amortization		47,281			5,631		49,725			6,068
Interest expense		13,812			216		12,363			257
Income tax expense (benefit)		26,660			2,308		12,583			3,229
Segment EBITDA		158,292			17,189		136,508			17,365
Derivative fair value adjustments		1,209			—		(735	)		—
Foreign currency transaction (gains) losses		—			224		—			(2,878	)
Loss on disposal of assets and costs from exit and disposal activities		961			611		10,253			215
Unconsolidated affiliates interest, tax, depreciation and amortization^(a)		—			1,237		886			1,174
Contingent consideration remeasurement		(15	)		—		33			—
Stock-based compensation expense		5,029			—		5,140			—
ESOP deferred stock-based compensation		11,113			—		7,946			—
Executive retirement (benefit) expense		(228	)		—		982			—
Restatement-related (benefit) costs^(b)		(1,938	)		—		3,390			—
Legal settlement		—			—		1,800			—
Transaction costs^(c)		398			6		1,149			—
Strategic growth and operational improvement initiatives^(d)		1,010			—		—			—
Segment Adjusted EBITDA	$	175,831		$	19,267	$	167,352		$	15,876

(Amounts in thousands)	Amount
Total fair value of consideration transferred	$	1,128,489
Less: cash acquired		48,489
Total net cash consideration paid	$	1,080,000

Exhibit Number		Exhibit Description

~~10.1~~†4.1		~~Form of Amendment to~~Advanced Drainage Systems, Inc. Employee Stock ~~Option Agreements~~Ownership Plan, as amended May 30, 2019.

31.1*		Certification of President and Chief Executive Officer of Advanced Drainage Systems, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Executive Vice President and Chief Financial Officer of Advanced Drainage Systems, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer of Advanced Drainage Systems, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Principal Financial Officer of Advanced Drainage Systems, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		XBRL Instance ~~Document.~~Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*		XBRL Taxonomy Extension Schema.

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase.

101.DEF*		XBRL Taxonomy Extension Definition Linkbase.

101.LAB*		XBRL Taxonomy Extension Label Linkbase.

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase.

ADVANCED DRAINAGE SYSTEMS, INC.

By:		/s/ D. Scott Barbour
		D. Scott Barbour
		President and Chief Executive Officer
		(Principal Executive Officer)

By:		/s/ Scott A. Cottrill
		Scott A. Cottrill
		Executive Vice President, Chief Financial Officer and Secretary
		(Principal Financial Officer)

By:		/s/ Tim A. Makowski
		Tim A. Makowski
		Vice President, Controller, and Chief Accounting Officer