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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-36557
ADVANCED DRAINAGE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware51-0105665
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
4640 Trueman Boulevard, Hilliard, Ohio 43026
(Address of Principal Executive Offices, Including Zip Code)
(614) 658-0050
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareWMSNew York Stock Exchange
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):
Large Accelerated FilerAccelerated Filer
Non-Accelerated FilerSmaller Reporting Company
Emerging Growth Company  
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, 2024, the registrant had 77,616,828 shares of common stock outstanding, which excludes 206,524 shares of unvested restricted common stock. The shares of common stock trade on the New York Stock Exchange under the ticker symbol “WMS.”


TABLE OF CONTENTS
   
 Page
   
 
   
 
   
 
   
 
   
 
   
 
   
   
   
   
  
   
   
   
   
  
   
   
   
- ii -

PART I. FINANCIAL INFORMATION

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands, except par value)
 December 31, 2023 March 31, 2023
ASSETS   
Current assets:   
Cash$560,744 $217,128 
Receivables (less allowance for doubtful accounts of $6,058 and $8,227, respectively)
240,810306,945
Inventories405,409463,994
Other current assets31,45929,422
Total current assets1,238,4221,017,489
Property, plant and equipment, net810,887733,059
Other assets:
Goodwill617,397620,193
Intangible assets, net365,631407,627
Other assets129,622122,757
Total assets$3,161,959 $2,901,125 
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of debt obligations$12,275 $14,693 
Current maturities of finance lease obligations12,8448,541
Accounts payable207,902210,111
Other accrued liabilities162,275142,400
Accrued income taxes13,8293,057
Total current liabilities409,125378,802
Long-term debt obligations (less unamortized debt issuance costs of $10,270 and $11,804, respectively)
1,261,7421,269,391
Long-term finance lease obligations37,94732,272
Deferred tax liabilities159,296159,056
Other liabilities71,98066,744
Total liabilities1,940,0901,906,265
Commitments and contingencies (see Note 9)
Mezzanine equity:
Redeemable common stock: $0.01 par value; 7,488 and 9,429 shares outstanding, respectively
121,686153,220
Total mezzanine equity121,686153,220
Stockholders’ equity:
Common stock; $0.01 par value: 1,000,000 shares authorized; 81,415 and 79,057
 shares issued, respectively; 70,200 and 69,518 shares outstanding, respectively
11,67011,647
Paid-in capital1,195,8931,134,864
Common stock in treasury, at cost(1,110,670)(920,999)
Accumulated other comprehensive loss(26,601)(27,580)
Retained earnings1,008,270626,215
Total ADS stockholders’ equity1,078,562824,147
Noncontrolling interest in subsidiaries21,62117,493
Total stockholders’ equity1,100,183841,640
Total liabilities, mezzanine equity and stockholders’ equity$3,161,959 $2,901,125 
See accompanying Notes to Condensed Consolidated Financial Statements.
- 3 -

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In thousands, except per share data)
 Three Months Ended December 31,Nine Months Ended December 31,
 2023 202220232022
Net sales$662,367 $655,167 $2,220,633 $2,453,562 
Cost of goods sold402,518 431,250 1,326,647 1,557,575 
Gross profit259,849 223,917 893,986 895,987 
Operating expenses:
Selling, general and administrative91,289 85,936 269,525 261,095 
Loss (gain) on disposal of assets and costs from exit and disposal activities
2,512 (348)(10,669)(147)
Intangible amortization12,782 13,842 38,376 41,360 
Income from operations153,266 124,487 596,754 593,679 
Other expense:
Interest expense22,331 20,001 65,984 49,334 
Derivative gain and other income, net(4,772)(4,125)(15,827)(5,632)
Income before income taxes135,707 108,611 546,597 549,977 
Income tax expense30,131 26,068 132,665 128,641 
Equity in net income of unconsolidated affiliates(1,304)(639)(3,880)(3,705)
Net income106,880 83,182 417,812 425,041 
Less: net income attributable to noncontrolling interest1,241 1,142 2,719 3,848 
Net income attributable to ADS$105,639 $82,040 $415,093 $421,193 
Weighted average common shares outstanding:
Basic77,857 82,067 78,455 82,891 
Diluted78,586 82,987 79,188 83,980 
Net income per share:
Basic$1.36 $1.00 $5.29 $5.08 
Diluted$1.34 $0.99 $5.24 $5.02 
See accompanying Notes to Condensed Consolidated Financial Statements.

- 4 -

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) (In thousands)
 Three Months Ended December 31,Nine Months Ended December 31,
 2023202220232022
Net income$106,880 $83,182 $417,812 $425,041 
Currency translation gain (loss)4,020 4,973 2,388 (4,688)
Comprehensive income110,900 88,155 420,200 420,353 
Less: other comprehensive income attributable to noncontrolling interest
963 1,069 1,409 797 
Less: net income attributable to noncontrolling interest1,241 1,142 2,719 3,848 
Total comprehensive income attributable to ADS$108,696 $85,944 $416,072 $415,708 
See accompanying Notes to Condensed Consolidated Financial Statements.
- 5 -

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
 Nine Months Ended
December 31,
 2023 2022
Cash Flows from Operating Activities   
Net income$417,812 $425,041 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization112,014107,346
Deferred income taxes335(4,165)
Gain on disposal of assets and costs from exit and disposal activities(10,669)(147)
Stock-based compensation23,63619,912
Amortization of deferred financing charges1,533909
Fair market value adjustments to derivatives(162)2,309
Equity in net income of unconsolidated affiliates(3,880)(3,705)
Other operating activities5,7202,732
Changes in working capital:
Receivables67,23099,958
Inventories59,75234,871
Prepaid expenses and other current assets(534)(4,532)
Accounts payable, accrued expenses, and other liabilities27,475(20,091)
Net cash provided by operating activities700,262660,438
Cash Flows from Investing Activities
Capital expenditures(136,385)(126,858)
Proceeds from disposition of assets19,979 
Acquisition, net of cash acquired(48,010)
Other investing activities52746
Net cash used in investing activities(115,879)(174,822)
Cash Flows from Financing Activities
Payments on syndicated Term Loan Facility(5,250)(5,250)
Proceeds from Revolving Credit Agreement26,200
Payments on Revolving Credit Agreement(140,500)
Proceeds from Amended Revolving Credit Agreement97,000
Payments on Amended Revolving Credit Agreement(97,000)
Proceeds from Senior Notes due 2030500,000
Debt issuance costs(11,575)
Payments on Equipment Financing(6,361)(10,213)
Payments on finance lease obligations(8,624)(4,954)
Repurchase of common stock(178,187)(375,027)
Cash dividends paid(33,111)(30,111)
Dividends paid to noncontrolling interest holder(3,652)
Proceeds from exercise of stock options3,9565,145
Payment of withholding taxes on vesting of restricted stock units(8,859)(28,653)
Net cash used in financing activities(236,436)(78,590)
Effect of exchange rate changes on cash1,271(461)
Net change in cash349,218406,565
Cash and restricted cash at beginning of period217,12820,125
Cash and restricted cash at end of period$566,346 $426,690 
 
RECONCILIATION TO BALANCE SHEET
Cash$560,744 
Restricted cash (included in Other assets in the Condensed Consolidated Balance Sheets)5,602
Total cash and restricted cash$566,346 
See accompanying Notes to Condensed Consolidated Financial Statements.
- 6 -

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY
(Unaudited) (In thousands)
Common
Stock
Paid
-In
Capital
Common
Stock in
Treasury
Accumulated
Other Compre-hensive
Loss
Retained Earnings
Total ADS
Stockholders’ Equity
Non-
controlling
Interest in
 Subsidiaries
Total
Stock-
holders’
Equity
 
Redeemable Common Stock
Redeemable Convertible
Preferred Stock
Total
Mezzanine
Equity
SharesAmountSharesAmount  Shares Amount Shares Amount
Balance at October 1, 202278,519$11,642 $1,119,453 5,314$(536,697)$(33,775)$477,790 $1,038,413 $17,329 $1,055,742 9,840$159,928 $ $159,928 
Net income82,04082,0401,14283,182
Other comprehensive income3,9043,9041,0694,973
Common stock dividends ($0.12 per share)
(9,819)(9,819)(9,819)
Share repurchases1,891(179,864)(179,864)(179,864)
Dividends paid to noncontrolling interest holder— (1,925)(1,925)
KSOP redeemable common stock conversion17122,7982,8002,800(171)(2,800)(2,800)
Exercise of common stock options17485485485
Restricted stock awards78135(3,141)(3,140)(3,140)
Stock-based compensation expense
6,1796,1796,179
Balance at December 31, 202278,785$11,645 $1,128,915 7,240 $(719,702)$(29,871)$550,011 $940,998 $17,615 $958,613 9,669 $157,128 $157,128 
Balance at April 1, 202275,529 $11,612 $1,065,628 3,220 $(318,691)$(24,386)$158,876 $893,039 $16,622 $909,661  $ 15,630 $195,384 $195,384 
Net income— — — — — — 421,193 421,193 3,848 425,041 — — — — — 
Other comprehensive (loss) income— — — — — (5,485)— (5,485)797 (4,688)— — — — — 
Common stock dividends ($0.36 per share)
— — — — — — (30,058)(30,058)— (30,058)— — — — — 
Dividends paid to noncontrolling interest holder— — — — — — — — (3,652)(3,652)— — — — — 
Share repurchases— — — 3,756 (375,027)— — (375,027)— (375,027)— — — — — 
ESOP share conversion— — — — — — — — — — 12,022 195,384 (15,630)(195,384) 
KSOP redeemable common stock conversion2,353 24 38,232 — — — — 38,256 — 38,256 (2,353)(38,256)— — (38,256)
Exercise of common stock options200 2 5,143 — — — — 5,145 — 5,145 — — — — — 
Restricted stock awards176 2 — 59 (5,633)— — (5,631)— (5,631)— — — — — 
Performance-based restricted stock units527 5 — 205 (20,351)— — (20,346)— (20,346)— — — — — 
Stock-based compensation expense— — 19,912 — — — — 19,912 — 19,912 — — — — — 
Balance at December 31, 202278,785 $11,645 $1,128,915 7,240 $(719,702)$(29,871)$550,011 $940,998 $17,615 $958,613 9,669 $157,128   $157,128 

See accompanying Notes to Condensed Consolidated Financial Statements.
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ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY
(Unaudited) (In thousands)
Common
Stock
Paid
-In
Capital
Common
Stock in
Treasury
Accumulated
Other Compre-hensive
Loss
Retained Earnings
Total ADS
Stockholders’ Equity
Non-
controlling
Interest in
 Subsidiaries
Total
Stock-
holders’
Equity
 
Redeemable Common Stock
Total
Mezzanine
Equity
SharesAmountSharesAmount  Shares Amount
Balance at October 1, 202380,635$11,663 $1,173,574 10,617$(1,039,717)$(29,658)$913,551 $1,029,413 $19,417 $1,048,830 8,206$133,349 $133,349 
Net income105,639105,6391,241106,880
Other comprehensive income3,0573,0579634,020
Common stock dividends ($0.14 per share)
(10,920)(10,920)(10,920)
Share repurchases598(70,905)(70,905)(70,905)
KSOP redeemable common stock conversion718711,65611,66311,663(718)(11,663)(11,663)
Exercise of common stock options411,3331,3331,333
Restricted stock awards1(48)(48)(48)
Stock-based compensation expense
7,4027,4027,402
ESPP Share Issuance20— 1,927 — — — — 1,927 — 1,927 — — — 
Other— 1 — — — — 1 — 1 — — — 
Balance at December 31, 202381,415$11,670 $1,195,893 11,215 $(1,110,670)$(26,601)$1,008,270 $1,078,562 $21,621 $1,100,183 7,488 $121,686 $121,686 
Balance at April 1, 202379,057 $11,647 $1,134,864 9,539 $(920,999)$(27,580)$626,215 $824,147 $17,493 $841,640 9,429 $153,220 $153,220 
Net income— — — — — — 415,093 415,093 2,719 417,812 — — — 
Other comprehensive income— — — — — 979 — 979 1,409 2,388 — — — 
Common stock dividends ($0.42 per share)
— — — — — — (33,038)(33,038)— (33,038)— — — 
Share repurchases— — — 1,579 (180,812)— — (180,812)— (180,812)— — — 
KSOP redeemable common stock conversion1,941 19 31,515 — — — — 31,534 — 31,534 (1,941)(31,534)(31,534)
Exercise of common stock options97 1 3,955 — — — — 3,956 — 3,956 — — — 
Restricted stock awards100 1 — 25 (2,463)— — (2,462)— (2,462)— — — 
Performance-based restricted stock units200 2 — 72 (6,396)— — (6,394)— (6,394)— — — 
Stock-based compensation expense— — 23,636 — — — — 23,636 — 23,636 — — — 
ESPP Share Issuance20 — 1,927 — — — — 1,927 — 1,927 — — — 
Other— — (4)— — — — (4)— (4)— — — 
Balance at December 31, 202381,415 $11,670 $1,195,893 11,215 $(1,110,670)$(26,601)$1,008,270 $1,078,562 $21,621 $1,100,183 7,488 $121,686 $121,686 
See accompanying Notes to Condensed Consolidated Financial Statements.
- 8 -

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business - Advanced Drainage Systems, Inc., incorporated in Delaware, and its subsidiaries (collectively referred to as “ADS” or the “Company”) designs, manufactures and markets innovative water management solutions in the stormwater and onsite septic wastewater industries, providing superior drainage solutions for use in the construction and agriculture marketplace. ADS’s products are used across a broad range of end markets and applications, including non-residential, infrastructure and agriculture applications.
The Company is managed and reports results of operations in three reportable segments: Pipe, Infiltrator Water Technologies Ultimate Holdings, Inc (“Infiltrator”) and International. The Company also reports the results of its Allied Products and all other business segments as Allied Products and Other.
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, 2023 was derived from audited financial statements included in the Annual Report on Form 10-K for the year ended March 31, 2023 (“Fiscal 2023 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, 2023 and the results of operations for the three and nine months ended December 31, 2023 and cash flows for the nine months ended December 31, 2023. 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 2023 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 income of unconsolidated affiliates in the Condensed Consolidated Statements of Operations. All intercompany balances and transactions have been eliminated in consolidation.
Recent Accounting Guidance
Improvements to Reportable Segment Disclosures - In November 2023, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) to amend ASC 280, Segment Reporting to enhance segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The amendments are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The amendments must be applied retrospectively to all periods presented in the financial statements. The Company is currently evaluating the impact of this standard on the Consolidated Financial Statements.
Improvements to Income Tax Disclosures - In December 2023, the FASB issued an ASU to amend ASC 740, Income Taxes to enhance the transparency and usefulness of income tax disclosures, primarily related to the rate reconciliation and income taxes paid information. The amendments may be applied prospectively or retrospectively and are effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of this standard on the Consolidated Financial Statements.
Except for the pronouncements described above, there have been no new accounting pronouncements issued or adopted since the filing of the Fiscal 2023 Form 10-K that have significance, or potential significance, to the Consolidated Financial Statements.

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2.GAIN ON DISPOSAL OF ASSETS AND COSTS FROM EXIT AND DISPOSAL ACTIVITIES
On April 14, 2023, the Company completed its divestiture of substantially all of the assets of Spartan Concrete, Inc. to a third party purchaser for consideration of $20.0 million. The Company recognized a gain on the sale of $14.9 million in the Condensed Consolidated Statements of Operations. Prior to the divestiture, the Company recorded the results of operations in Allied & Other.
3.REVENUE RECOGNITION
Revenue Disaggregation - The Company disaggregates net sales by Domestic, International and Infiltrator and further disaggregates Domestic and International by product type, 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. Refer to “Note 12. Business Segments Information” for the Company’s disaggregation of Net sales by 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 following table presents the balance of the Company’s contract asset and liability as of the periods presented:
(In thousands)December 31, 2023March 31, 2023
Contract asset - product returns$1,546 $933 
Refund liability4,628 2,664 
4.LEASES
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 remaining terms of less than one year to 14 years. A portion of the Company’s yard leases include an option to extend the leases for up to five years. The Company has included renewal options which are reasonably certain to be exercised in its right-of-use assets and lease liabilities.
5.INVENTORIES
Inventories as of the periods presented consisted of the following:
(In thousands)December 31, 2023March 31, 2023
Raw materials$106,097 $108,206 
Finished goods299,312355,788
Total inventories$405,409 $463,994 
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6.NET INCOME PER SHARE AND STOCKHOLDERS' EQUITY
Net Income per Share - 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,
(In thousands, except per share data)2023202220232022
NET INCOME PER SHARE—BASIC:   
Net income available to common stockholders – Basic
$105,639 $82,040 $415,093 $421,193 
Weighted average number of common shares outstanding – Basic
77,857 82,067 78,455 82,891 
Net income per common share – Basic$1.36 $1.00 $5.29 $5.08 
NET INCOME PER SHARE—DILUTED:
Net income available to common stockholders – Diluted
$105,639 $82,040 $415,093 $421,193 
Weighted average number of common shares outstanding – Basic
77,857 82,067 78,455 82,891 
Assumed restricted stock75 114 60 131 
Assumed exercise of stock options595 626 597 702 
Assumed performance units59 180 76 256 
Weighted average number of common shares outstanding – Diluted
78,58682,98779,18883,980
Net income per common share – Diluted$1.34 $0.99 $5.24 $5.02 
Potentially dilutive securities excluded as anti-dilutive
19 42 46 45 
7.RELATED PARTY TRANSACTIONS
ADS Mexicana - ADS conducts business in Mexico and Central America through its joint venture, ADS Mexicana, 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.
On June 6, 2022, the Company and ADS Mexicana amended the Intercompany Revolving Credit Promissory Note (the “Intercompany Note”) with a borrowing capacity of $9.5 million. The Intercompany Note matures on June 8, 2027. The Intercompany Note indemnifies the ADS Mexicana joint venture partner for 49% of any unpaid borrowings. The interest rates under the Intercompany Note are determined by certain base rates or Secured Overnight Financing Rate (“SOFR”) plus an applicable margin based on the Leverage Ratio. As of both December 31, 2023 and March 31, 2023, there were no borrowings outstanding 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. ADS owns 50% of the South American Joint Venture. ADS is the guarantor of 50% of the South American Joint Venture’s credit arrangement, and the debt guarantee is shared equally with the joint venture partner. The Company’s maximum potential obligation under this guarantee is $5.5 million as of December 31, 2023. The maximum borrowings permitted under the South American Joint Venture’s credit facility are $11.0 million. The Company does not anticipate any required contributions related to the balance of this credit arrangement. As of December 31, 2023, there was no outstanding principal balance for the South American Joint Venture’s credit facility including letters of credit. As of March 31, 2023, the outstanding principal balances of the South American Joint Venture’s credit facility including letters of credit was $5.5 million.
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8.DEBT
Long-term debt as of the periods presented consisted of the following:
(In thousands)December 31, 2023 March 31, 2023
Term Loan Facility$422,000 $427,250 
Senior Notes due 2027350,000350,000 
Senior Notes due 2030500,000500,000 
Revolving Credit Facility 
Equipment Financing12,28718,638 
Total1,284,2871,295,888
Less: Unamortized debt issuance costs10,27011,804
Less: Current maturities12,27514,693
Long-term debt obligations$1,261,742 $1,269,391 
Senior Secured Credit Facilities – In May 2022, the Company entered into a Second Amendment (the “Second Amendment”) to the Company's Base Credit Agreement with Barclays Bank PLC, as administrative agent under the Term Loan Facility, PNC Bank, National Association, as new administrative agent under the Revolving Credit Facility. Among other things, the Second Amendment (i) amended the Base Credit Agreement by increasing the Revolving Credit Facility (the “Amended Revolving Credit Facility”) from $350 million to $600 million (including an increase of the sub-limit for the swing-line sub-facility from $50 million to $60 million), (ii) extended the maturity date of the Revolving Credit Facility to May 26, 2027, (iii) revised the “applicable margin” to provide an additional step-down to 175 basis points (for Term Benchmark based loans) and 75 basis points (for base rate loans) in the event the consolidated senior secured net leverage ratio is less than 2.00 to 1.00, and (iv) reset the “incremental amount” and the investment basket in non-guarantors and joint ventures. The Second Amendment also revised the reference interest rate from LIBOR to SOFR for both the Amended Revolving Credit Facility and the Term Loan Facility. Letters of credit outstanding at December 31, 2023 and March 31, 2023 amounted to $11.2 million and $9.7 million, respectively, and reduced the availability of the Revolving Credit Facility.
Senior Notes due 2027 – On September 23, 2019, the Company issued $350.0 million aggregate principal amount of 5.0% Senior Notes due 2027 (the “2027 Notes”) pursuant to an Indenture, dated September 23, 2019 (the “2027 Indenture”), among the Company, the guarantors party thereto (the “Guarantors”) and U.S. Bank National Association, as Trustee (the “Trustee”).
Senior Notes due 2030 – On June 9, 2022, the Company issued $500.0 million aggregate principal amount of 6.375% Senior Notes due 2030 (the “2030 Notes”) pursuant to an Indenture, dated June 9, 2022 (the “2030 Indenture”), among the Company, the Guarantors and the Trustee.
Equipment Financing – The assets under the Equipment Financing acquired are titled to the Company and included in Property, plant and equipment, net on the Company's Condensed Consolidated Balance Sheet. The equipment financing has an initial term of between 12 and 84 months, based on the life of the equipment, and bears a weighted average interest of 1.6% as of December 31, 2023. The current portion of the equipment financing is $5.3 million, and the long-term portion is $7.0 million at December 31, 2023.
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. The following table presents the carrying and fair value of the Company’s 2027 Notes, 2030 Notes and Equipment Financing for the periods presented:
 December 31, 2023 March 31, 2023
(In thousands)Fair ValueCarrying ValueFair Value Carrying Value
Senior Notes due 2027$340,883 $350,000 $333,970 $350,000 
Senior Notes due 2030506,075 500,000 496,605 500,000 
Equipment Financing11,940 12,287 17,921 18,638 
Total fair value$858,898 $862,287 $848,496 $868,638 
The fair values of the 2027 Notes and 2030 Notes were determined based on quoted market data for the Company’s 2027 Notes and 2030 Notes, respectively. The fair value of the Equipment Financing 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
- 12 -

period. The categorization of the framework used to evaluate the 2027 Notes, 2030 Notes and Equipment Financing are considered Level 2. The Company believes the carrying amount of the remaining long-term debt, including the Term Loan Facility and Revolving Credit Facility, is not materially different from its fair value as the interest rates and terms of the borrowings are similar to currently available borrowings.
9.COMMITMENTS AND CONTINGENCIES
Purchase Commitments - The Company has historically secured supplies of resin raw material by agreeing to purchase quantities during a future given period at a fixed price. These purchase contracts typically ranged from 1 to 12 months and occur in the ordinary course of business. The Company does not have any outstanding purchase commitments with fixed price and quantity as of December 31, 2023. The Company also enters into equipment purchase contracts with manufacturers.
Litigation and Other Proceedings – 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.
10.INCOME TAXES
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 the occurrence of discrete events. For the three months ended December 31, 2023 and 2022, the Company utilized an effective tax rate of 22.2% and 24.0%, respectively, to calculate its provision for income taxes. For the nine months ended December 31, 2023 and 2022, the Company utilized an effective tax rate of 24.3% and 23.4%, respectively, to calculate its provision for income taxes. State and local income taxes increased the effective rate for the three and nine months ended December 31, 2023 and 2022. Discrete income tax benefits related to amended state tax returns and the federal return to provision adjustment decreased the effective tax rate for the three months ended December 31, 2023. Additionally, discrete income tax benefit related to the stock-based compensation windfall decreased the effective tax rate for the three and nine months ended December 31, 2022.
11. STOCK-BASED COMPENSATION
ADS has several programs for stock-based payments to employees and non-employee members of its Board of Directors, including stock options, performance-based restricted stock units and restricted stock. The Company recognized stock-based compensation expense in the following line items of the Condensed Consolidated Statements of Operations for the periods presented:
Three Months Ended
December 31,
Nine Months Ended
December 31,
(In thousands)2023202220232022
Component of income before income taxes:
Cost of goods sold$1,316 $743 $3,473 $2,175 
Selling, general and administrative expenses6,0865,43620,16317,737
Total stock-based compensation expense$7,402 $6,179 $23,636 $19,912 
The following table summarizes stock-based compensation expense by award type for the periods presented:
 Three Months Ended
December 31,
Nine Months Ended
December 31,
(In thousands)2023202220232022
Stock-based compensation expense:  
Stock Options$1,305 $1,035 $4,046 $3,316 
Restricted Stock2,0501,7546,131 5,480 
Performance-based Restricted Stock Units3,1912,82711,110 9,619 
Employee Stock Purchase Plan313694  
Non-Employee Directors5435631,655 1,497 
Total stock-based compensation expense$7,402 $6,179 $23,636 $19,912 
- 13 -

2017 Omnibus Incentive Plan - The 2017 Incentive Plan provides for the issuance of a maximum of 5.0 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.
Restricted Stock – During the nine months ended December 31, 2023, the Company granted 0.1 million shares of restricted stock with a grant date fair value of $13.2 million.
Performance-based Restricted Stock Units (“Performance Units”) – During the nine months ended December 31, 2023, the Company granted 0.1 million performance share units at a grant date fair value of $8.7 million.
Options – During the nine months ended December 31, 2023, the Company granted 0.2 million nonqualified stock options under the 2017 Incentive Plan with a grant date fair value of $7.5 million. The Company estimates the fair value of stock options using a Black-Scholes option-pricing model. The following table summarizes the assumptions used to estimate the fair value of stock-options during the period presented:
 Nine Months Ended December 31, 2023
Common stock price$96.51
Expected stock price volatility45.6%
Risk-free interest rate3.8%
Weighted-average expected option life (years)6
Dividend yield0.58%

Employee Stock Purchase Plan (“ESPP”) - In July 2022, the Company’s stockholders approved the Advanced Drainage Systems, Inc. Employee Stock Purchase Plan, which provides for a maximum of 0.4 million shares of the Company’s common stock. Eligible employees may purchase the Company's common stock at 85% of the lower of the fair market value of the Company's common stock on the first day or the last day of the offering period. The first offering period commenced July 1, 2023 and ended December 31, 2023. The next offering period will commence January 1, 2024 and will end June 30, 2024.

12.BUSINESS SEGMENTS INFORMATION
The Company operates its business in three distinct reportable segments: “Pipe”, “International” and “Infiltrator.” “Allied Products & Other” represents the Company’s Allied Products and all other business segments. The Chief Operating Decision Maker (the “CODM”) evaluates segment reporting based on Net Sales and Segment Adjusted Gross Profit. The Company calculated Segment Adjusted Gross Profit as Net sales less Costs of goods sold, depreciation and amortization, stock-based compensation and non-cash charges. A measure of assets is not applicable, as segment assets are not regularly reviewed by the CODM for evaluating performance or allocating resources.
- 14 -

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, 2023December 31, 2022
(In thousands)Net Sales  Intersegment Net Sales  Net Sales from External Customers Net Sales  Intersegment Net Sales  Net Sales from External Customers
Pipe$360,733 $(14,680)$346,053 $375,719 $(10,839)$364,880 
Infiltrator131,144 (27,273)103,871 103,895 (14,961)88,934 
International
International - Pipe44,203 (2,369)41,834 44,882 (5,311)39,571 
International - Allied Products & Other14,166 (1)14,165 14,075 — 14,075 
Total International58,369 (2,370)55,999 58,957 (5,311)53,646 
Allied Products & Other159,162 (2,718)156,444 149,044 (1,337)147,707 
Intersegment Eliminations(47,041)47,041 — (32,448)32,448 — 
Total Consolidated$662,367 $ $662,367 $655,167 $ $655,167 
Nine Months Ended
December 31, 2023December 31, 2022
(In thousands)Net SalesIntersegment Net SalesNet Sales from External CustomersNet SalesIntersegment Net SalesNet Sales from External Customers
Pipe$1,217,302 $(36,974)$1,180,328 $1,401,554 $(31,483)$1,370,071 
Infiltrator406,361 (63,405)342,956 420,920 (66,317)354,603 
International
International - Pipe133,787 (3,917)129,870 154,762 (18,509)136,253 
International - Allied Products & Other46,789 (27)46,762 49,172 — 49,172 
Total International180,576 (3,944)176,632 203,934 (18,509)185,425 
Allied Products & Other528,303 (7,586)520,717 550,153