Fiscal Year 2022

Annual Report
Advanced Drainage Systems, Inc.
[Link]
 A Letter from our CEO
Diversity is important to ADS because we know diverse Finally, the remaining balance on ADS’ Employee Stock
perspectives lead to better ideas, processes, performance, Ownership Plan (ESOP) loan was repaid on March 31,
and more opportunities for all. We have made progress on 2022, effectively winding down the ESOP one year ahead
these initiatives in hiring and promotions, employee training, of the plan’s maturity. Winding down the ESOP gives our
philanthropic efforts and in our commercial relationships employees more flexibility in managing their retirement
Dear Fellow Shareholders, with organizations that are owned by minorities, plans and allows us to provide a more traditional retirement
In fiscal 2022, we delivered another record year of financial traditional materials. The value proposition that drives our women, veterans or otherwise socially and economically program when attracting new talent to our organization.
performance. The past year posed several unique challenges, material conversion strategy is strengthened by the shortage disadvantaged people (XBE relationships). We look forward
including continued inflationary pressure, supply chain of available labor, as contractors look for ways to make jobsites to reporting our progress on these initiatives in our fiscal Board Leadership Transitions
challenges and a shortage of available labor in both safer and improve installation time. 2022 Sustainability Report. As announced in May 2022, Bob Kidder, the Chairman of
manufacturing and transportation. Despite these challenges, the ADS Board of Directors, is retiring at the end of his term
In fiscal 2022, we successfully grew 45% in the priority states Delivering Consistent Performance
the team at Advanced Drainage Systems was able to capitalize this July and Bob Eversole has been elected by the Board to
identified for market share growth. These 17 states – notably
on the strong market demand to deliver a record $2.8 billion in In fiscal 2022 ADS’ financial performance exceeded the succeed him as Chairman of the Board.
Florida, Texas and California – represent approximately 60% of
net sales and $676 million of Adjusted EBITDA. I am extremely targets we issued and periodically updated throughout the
construction activity in the United States, including a majority On behalf of the entire Board, I would like to express
proud of our employees who made this happen, especially the year. We also exceeded our 2018 Investor Day targets and
of housing starts and streets and highways activity. We are also gratitude to Bob Kidder for his longstanding service to the
sales and operations teams, who worked together to serve our introduced new three-year goals at our March 2022 Investor
accelerating market share growth by partnering with national ADS Board of Directors. Since becoming a director in 2014
customers through this period of record growth. Day event. Consistent with previous targets, our fiscal 2025
and regional homebuilders, pursuing fast-growing segments of and serving as Board Chair since 2017, he has provided
goals are focused on sales growth, margin expansion and
Early in the fiscal year, we experienced material shortages the market like warehouses and data center developments, and tremendous leadership and imparted timely advice
free cash flow generation. Executing on these three metrics
due to winter storms in the Gulf Coast, which we were able focusing on high-potential in large and attractive markets. These throughout ADS’ journey as a public company. His board
allows us to continue generating a significant amount of
to mitigate through our procurement scale and increased strategies continued to bear fruit in fiscal 2022, and we are knowledge and management experience are unmatched, and
capital to invest in the business, pursue acquisitions and
use of recycled material. Though availability improved as confident they will continue to drive growth for years to come. I am very grateful for his guidance and partnership since I
provide strong returns to shareholders.
we moved through the year, the cost of materials remained joined ADS in 2017. It is ADS’ good fortune to have had Bob
elevated. We managed this inflationary cost pressure through Driven by Water and Sustainability Consistently meeting the expectations customers, Kidder serve as Board Chair over the last five years.
favorable pricing, which we aggressively went after in the first As a leading provider of stormwater and onsite septic employees, suppliers and stakeholders in the financial
In addition, we are pleased to have Bob Eversole serve as
half of the fiscal year. In addition, challenges from the lack of wastewater management solutions, we protect and manage markets is a core element of ADS’ culture. We experienced
Chairman. Bob Eversole joined the ADS Board in 2008 and
available labor persisted throughout fiscal 2022. These labor water, the world’s most precious resource, safeguarding just how important it is to have credibility with customers
is intimately familiar with our business. He currently serves
challenges, in combination with record demand, stress tested our environment and communities. Our products are and suppliers over the last year as we faced supply chain
as Chair of the Audit Committee, bringing deep expertise on
our operations. We remained focused on customer service manufactured using a high content of recycled material, challenges and significant inflationary pressure. In addition,
financial matters and extensive leadership and management
and a “first to recover” mindset, deploying programs to get which we primarily source and process through our vertically maintaining credibility with our shareholders, delivering
experience including his experience at Stonehenge Partners,
more production out of our available assets. These programs, integrated recycling operations. In fiscal 2022, we purchased consistent performance and doing what we say we are
Inc. and Fifth Third Bank.
including centralizing planning, rationalizing production, over 600 million pounds of recycled plastics, supported by going to do are the premises that will continue to set
leveraging our international footprint and accelerating our position as the largest plastic recycler in North America. ADS apart from other companies, regardless of the Looking Forward
automation initiatives, helped us increase production within our market environment. As I have said many times before, it is clear to me that ADS’
In January, we released 10-year Sustainability Goals. These
manufacturing network over the prior year. ambitious targets are built around REASON, because at best days are still ahead of us. We anticipate demand in fiscal
Effective Capital Deployment
Recognizing these dynamics will carry into fiscal 2023, we will ADS, Our Reason is WaterTM. These goals demonstrate our 2023 will continue to be favorable, with ADS and Infiltrator
In fiscal 2022, capital spending across the businesses
continue to deploy programs that mitigate these challenges in commitment to reducing environmental impact, enhancing well positioned to capitalize on future growth opportunities.
increased 89% year-over-year as we reinvested a significant
the short- and long-term, appropriately recalibrating to changes the safety of our people, creating a diverse, equitable and On behalf of the ADS leadership team and Board of Directors,
amount of capital to support growth. Over the next couple
in the market such as continued inflationary cost pressures. We inclusive workforce and improving the communities we I would like to thank our employees for their hard work
of years, we will continue to invest capital at elevated levels
believe we have the right playbook in place to not only protect touch. Through these new goals, we will reduce our absolute throughout the past year, as well as their commitment to
to support organic growth. In addition, we successfully
and expand profitability over time, but also drive above-market greenhouse gas emissions by over 40% from the fiscal 2020 the future of ADS. We look forward to another strong year
completed the acquisition of Jet Polymer Recycling,
revenue growth with our proven material conversion strategy. baseline, while simultaneously increasing our use of recycled in fiscal 2023.
expanding the ADS Recycling capabilities to support
plastics to 1 billion pounds by fiscal 2032.
In March, we held the second ADS Investor Day in New York future growth and underpinning ADS’ commitment to
City. We presented fiscal 2025 financial targets to guide our Over the last twelve months, we spent time developing ADS’ environmental sustainability. Through this acquisition, we Sincerely,
stakeholders on the future growth and profitability of ADS as Diversity, Equity and Inclusion strategy to align with our secured high-quality recycled plastic to leverage in our fast-
well as additional information on the Infiltrator business. The strategic priorities. The components of the strategy include: growing onsite septic wastewater business and a platform to
following themes presented at this event are the foundation of / Developing our workforce to further invest in diverse obtain additional high-density polyethylene in the southern
our strategy to drive shareholder value. talent and professional development. region of the United States. D. Scott Barbour
President and CEO
Material Conversion Strategy / Creating an inclusive workplace to engage, educate After the closing of fiscal 2022, in early May 2022, we
and train employees in diverse thinking. announced the acquisition of Cultec, Inc., a manufacturer
Both ADS and Infiltrator have a consistent track record of
of plastic chambers and other related products for use in
generating above-market growth, driven by our combined / Engaging with partners to establish diverse supplier, the stormwater and onsite septic markets. The acquisition
efforts to convert the construction, agriculture and onsite customer, and association relationships. of Cultec expands our portfolio of solutions, enabling us to
septic markets to better performing products that are safer to
/ Supporting our community through philanthropic and meet the growing and evolving needs of our customers.
install, environmentally friendly and more cost effective than
volunteerism efforts that support diverse causes.

ADS Annual Report 2022 ADS Annual Report 2022 | 3

 A Letter from our CEO
Diversity is important to ADS because we know diverse Finally, the remaining balance on ADS’ Employee Stock
perspectives lead to better ideas, processes, performance, Ownership Plan (ESOP) loan was repaid on March 31,
and more opportunities for all. We have made progress on 2022, effectively winding down the ESOP one year ahead
these initiatives in hiring and promotions, employee training, of the plan’s maturity. Winding down the ESOP gives our
philanthropic efforts and in our commercial relationships employees more flexibility in managing their retirement
Dear Fellow Shareholders, with organizations that are owned by minorities, plans and allows us to provide a more traditional retirement
In fiscal 2022, we delivered another record year of financial traditional materials. The value proposition that drives our women, veterans or otherwise socially and economically program when attracting new talent to our organization.
performance. The past year posed several unique challenges, material conversion strategy is strengthened by the shortage disadvantaged people (XBE relationships). We look forward
including continued inflationary pressure, supply chain of available labor, as contractors look for ways to make jobsites to reporting our progress on these initiatives in our fiscal Board Leadership Transitions
challenges and a shortage of available labor in both safer and improve installation time. 2022 Sustainability Report. As announced in May 2022, Bob Kidder, the Chairman of
manufacturing and transportation. Despite these challenges, the ADS Board of Directors, is retiring at the end of his term
In fiscal 2022, we successfully grew 45% in the priority states Delivering Consistent Performance
the team at Advanced Drainage Systems was able to capitalize this July and Bob Eversole has been elected by the Board to
identified for market share growth. These 17 states – notably
on the strong market demand to deliver a record $2.8 billion in In fiscal 2022 ADS’ financial performance exceeded the succeed him as Chairman of the Board.
Florida, Texas and California – represent approximately 60% of
net sales and $676 million of Adjusted EBITDA. I am extremely targets we issued and periodically updated throughout the
construction activity in the United States, including a majority On behalf of the entire Board, I would like to express
proud of our employees who made this happen, especially the year. We also exceeded our 2018 Investor Day targets and
of housing starts and streets and highways activity. We are also gratitude to Bob Kidder for his longstanding service to the
sales and operations teams, who worked together to serve our introduced new three-year goals at our March 2022 Investor
accelerating market share growth by partnering with national ADS Board of Directors. Since becoming a director in 2014
customers through this period of record growth. Day event. Consistent with previous targets, our fiscal 2025
and regional homebuilders, pursuing fast-growing segments of and serving as Board Chair since 2017, he has provided
goals are focused on sales growth, margin expansion and
Early in the fiscal year, we experienced material shortages the market like warehouses and data center developments, and tremendous leadership and imparted timely advice
free cash flow generation. Executing on these three metrics
due to winter storms in the Gulf Coast, which we were able focusing on high-potential in large and attractive markets. These throughout ADS’ journey as a public company. His board
allows us to continue generating a significant amount of
to mitigate through our procurement scale and increased strategies continued to bear fruit in fiscal 2022, and we are knowledge and management experience are unmatched, and
capital to invest in the business, pursue acquisitions and
use of recycled material. Though availability improved as confident they will continue to drive growth for years to come. I am very grateful for his guidance and partnership since I
provide strong returns to shareholders.
we moved through the year, the cost of materials remained joined ADS in 2017. It is ADS’ good fortune to have had Bob
elevated. We managed this inflationary cost pressure through Driven by Water and Sustainability Consistently meeting the expectations customers, Kidder serve as Board Chair over the last five years.
favorable pricing, which we aggressively went after in the first As a leading provider of stormwater and onsite septic employees, suppliers and stakeholders in the financial
In addition, we are pleased to have Bob Eversole serve as
half of the fiscal year. In addition, challenges from the lack of wastewater management solutions, we protect and manage markets is a core element of ADS’ culture. We experienced
Chairman. Bob Eversole joined the ADS Board in 2008 and
available labor persisted throughout fiscal 2022. These labor water, the world’s most precious resource, safeguarding just how important it is to have credibility with customers
is intimately familiar with our business. He currently serves
challenges, in combination with record demand, stress tested our environment and communities. Our products are and suppliers over the last year as we faced supply chain
as Chair of the Audit Committee, bringing deep expertise on
our operations. We remained focused on customer service manufactured using a high content of recycled material, challenges and significant inflationary pressure. In addition,
financial matters and extensive leadership and management
and a “first to recover” mindset, deploying programs to get which we primarily source and process through our vertically maintaining credibility with our shareholders, delivering
experience including his experience at Stonehenge Partners,
more production out of our available assets. These programs, integrated recycling operations. In fiscal 2022, we purchased consistent performance and doing what we say we are
Inc. and Fifth Third Bank.
including centralizing planning, rationalizing production, over 600 million pounds of recycled plastics, supported by going to do are the premises that will continue to set
leveraging our international footprint and accelerating our position as the largest plastic recycler in North America. ADS apart from other companies, regardless of the Looking Forward
automation initiatives, helped us increase production within our market environment. As I have said many times before, it is clear to me that ADS’
In January, we released 10-year Sustainability Goals. These
manufacturing network over the prior year. ambitious targets are built around REASON, because at best days are still ahead of us. We anticipate demand in fiscal
Effective Capital Deployment
Recognizing these dynamics will carry into fiscal 2023, we will ADS, Our Reason is WaterTM. These goals demonstrate our 2023 will continue to be favorable, with ADS and Infiltrator
In fiscal 2022, capital spending across the businesses
continue to deploy programs that mitigate these challenges in commitment to reducing environmental impact, enhancing well positioned to capitalize on future growth opportunities.
increased 89% year-over-year as we reinvested a significant
the short- and long-term, appropriately recalibrating to changes the safety of our people, creating a diverse, equitable and On behalf of the ADS leadership team and Board of Directors,
amount of capital to support growth. Over the next couple
in the market such as continued inflationary cost pressures. We inclusive workforce and improving the communities we I would like to thank our employees for their hard work
of years, we will continue to invest capital at elevated levels
believe we have the right playbook in place to not only protect touch. Through these new goals, we will reduce our absolute throughout the past year, as well as their commitment to
to support organic growth. In addition, we successfully
and expand profitability over time, but also drive above-market greenhouse gas emissions by over 40% from the fiscal 2020 the future of ADS. We look forward to another strong year
completed the acquisition of Jet Polymer Recycling,
revenue growth with our proven material conversion strategy. baseline, while simultaneously increasing our use of recycled in fiscal 2023.
expanding the ADS Recycling capabilities to support
plastics to 1 billion pounds by fiscal 2032.
In March, we held the second ADS Investor Day in New York future growth and underpinning ADS’ commitment to
City. We presented fiscal 2025 financial targets to guide our Over the last twelve months, we spent time developing ADS’ environmental sustainability. Through this acquisition, we Sincerely,
stakeholders on the future growth and profitability of ADS as Diversity, Equity and Inclusion strategy to align with our secured high-quality recycled plastic to leverage in our fast-
well as additional information on the Infiltrator business. The strategic priorities. The components of the strategy include: growing onsite septic wastewater business and a platform to
following themes presented at this event are the foundation of / Developing our workforce to further invest in diverse obtain additional high-density polyethylene in the southern
our strategy to drive shareholder value. talent and professional development. region of the United States. D. Scott Barbour
President and CEO
Material Conversion Strategy / Creating an inclusive workplace to engage, educate After the closing of fiscal 2022, in early May 2022, we
and train employees in diverse thinking. announced the acquisition of Cultec, Inc., a manufacturer
Both ADS and Infiltrator have a consistent track record of
of plastic chambers and other related products for use in
generating above-market growth, driven by our combined / Engaging with partners to establish diverse supplier, the stormwater and onsite septic markets. The acquisition
efforts to convert the construction, agriculture and onsite customer, and association relationships. of Cultec expands our portfolio of solutions, enabling us to
septic markets to better performing products that are safer to
/ Supporting our community through philanthropic and meet the growing and evolving needs of our customers.
install, environmentally friendly and more cost effective than
volunteerism efforts that support diverse causes.

2 | ADS Annual Report 2022 ADS Annual Report 2022

 A Letter from our Chairman Key Financial Highlights

FY 2022 Revenue FY 2022 Adjusted EBITDA1

(Figures in millions) (Figures in millions)
Dear Fellow Shareholders,
On behalf of the Board, I would first and foremost like In addition, the Board formalized the Sustainability
to thank ADS’ employees for their continued efforts Committee, which was previously a sub-committee CAGR: 20.1%
and commitment to customers in the face of changing of the Nominating and Corporate Governance
market dynamics. The employee efforts, alongside Committee. The newly formed Sustainability CAGR: 33.9%
strong execution by the management team, drove Committee will be responsible for board oversight of
another record year of financial performance at ADS. ADS’ sustainability and environmental strategies and
policies, including progress towards the Company’s
The Board continues to work alongside the science-based targets to reduce overall greenhouse
management team to strategically deploy capital, gas emissions. We are confident that we will continue $1,330 $1,385 $1,674 $1,983 $2,769 $210 $232 $362 $567 $676
evaluate and execute strategic acquisitions, and making progress on our Environmental, Social and
ultimately drive shareholder returns. This year, Governance (“ESG”) initiatives going forward and look 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022
the Board approved a new, $1 billion multi-year forward to sharing more information about our ESG
stock repurchase authorization after management initiatives in the upcoming sustainability report for
successfully executed on a $292 million stock fiscal 2022, released later this summer. FY 2022 Sales by Geography FY 2022 Sales by Product Category
repurchase authorization in fiscal 2022. In addition,
the Board approved a 9% increase in the annual Finally, as announced in May I plan to retire from the
dividend to $0.48 per share annually, as well as the ADS Board this July at the conclusion of my current
acquisitions of Jet Polymer Recycling and Cultec, Inc. term. I joined the ADS Board in 2014 and have 92% Domestic 60% Pipe
just subsequent to the end of the fiscal year. ADS’ thoroughly enjoyed my time with ADS. I am confident
continued strong financial performance and execution in the future of ADS under the leadership of the 5% Canada 21% Allied
provides the flexibility to return this capital to Board and management teams and am excited for Other
3% 19% Onsite
shareholders and invest in the growth of the business. what their future holds. I believe the timing is right International Septic
for me to retire following the positive strides ADS
We continue to focus on adding experienced, has made over the last several years, including the
diverse, and independent directors as evidenced successful acquisition and integration of Infiltrator
by the addition of Anil Seetharam at the last annual Water Technologies, the strong investor conviction in
shareholder meeting. Anil has broad financial ADS’ market position and, importantly, the depth and FY 2022 Domestic Revenue by End Market
expertise with public companies in capital markets, breadth of the leadership teams. I have full confidence
investor relations and acquisitions, and our abilities that my successor, Bob Eversole, will be a great leader
are enhanced by his presence. The board is also in his new role as Board Chair. Agriculture
proposing that shareholders approve a new director,
Kelly Gast, at the July 2022 annual shareholder Sincerely, 7%
ADS Sales Growth
meeting. Kelly currently serves as the Chief Financial Infrastructure
Officer of Bayer’s Crop Science division, bringing broad Construction Non-Residential Non-Residential
Construction +43% Construction
financial experience from her leadership positions at 7%
Bayer, as well as business strategy and commercial 49%
Residential
+46%
%
expertise. ADS governance is strengthened with Construction
C. Robert Kidder
these two leaders.
Chairman of the Board of Directors Infrastructure
+35%
of Domestic Construction
Sales
+8% Agriculture
Residential
Construction
37%

1
EBITDA adjustments exclude one-time transaction costs and certain non-cash items; Adjusted EBITDA is a Non-GAAP measure. Please see “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” section of the accompanying Form 10-K for the definitions of non-GAAP measures and reconciliation of non-GAAP
measures to GAAP measures.

ADS Annual Report 2022 ADS Annual Report 2022 | 5

 A Letter from our Chairman Key Financial Highlights

FY 2022 Revenue FY 2022 Adjusted EBITDA1

(Figures in millions) (Figures in millions)
Dear Fellow Shareholders,
On behalf of the Board, I would first and foremost like In addition, the Board formalized the Sustainability
to thank ADS’ employees for their continued efforts Committee, which was previously a sub-committee CAGR: 20.1%
and commitment to customers in the face of changing of the Nominating and Corporate Governance
market dynamics. The employee efforts, alongside Committee. The newly formed Sustainability CAGR: 33.9%
strong execution by the management team, drove Committee will be responsible for board oversight of
another record year of financial performance at ADS. ADS’ sustainability and environmental strategies and
policies, including progress towards the Company’s
The Board continues to work alongside the science-based targets to reduce overall greenhouse
management team to strategically deploy capital, gas emissions. We are confident that we will continue $1,330 $1,385 $1,674 $1,983 $2,769 $210 $232 $362 $567 $676
evaluate and execute strategic acquisitions, and making progress on our Environmental, Social and
ultimately drive shareholder returns. This year, Governance (“ESG”) initiatives going forward and look 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022
the Board approved a new, $1 billion multi-year forward to sharing more information about our ESG
stock repurchase authorization after management initiatives in the upcoming sustainability report for
successfully executed on a $292 million stock fiscal 2022, released later this summer. FY 2022 Sales by Geography FY 2022 Sales by Product Category
repurchase authorization in fiscal 2022. In addition,
the Board approved a 9% increase in the annual Finally, as announced in May I plan to retire from the
dividend to $0.48 per share annually, as well as the ADS Board this July at the conclusion of my current
acquisitions of Jet Polymer Recycling and Cultec, Inc. term. I joined the ADS Board in 2014 and have 92% Domestic 60% Pipe
just subsequent to the end of the fiscal year. ADS’ thoroughly enjoyed my time with ADS. I am confident
continued strong financial performance and execution in the future of ADS under the leadership of the 5% Canada 21% Allied
provides the flexibility to return this capital to Board and management teams and am excited for Other
3% 19% Onsite
shareholders and invest in the growth of the business. what their future holds. I believe the timing is right International Septic
for me to retire following the positive strides ADS
We continue to focus on adding experienced, has made over the last several years, including the
diverse, and independent directors as evidenced successful acquisition and integration of Infiltrator
by the addition of Anil Seetharam at the last annual Water Technologies, the strong investor conviction in
shareholder meeting. Anil has broad financial ADS’ market position and, importantly, the depth and FY 2022 Domestic Revenue by End Market
expertise with public companies in capital markets, breadth of the leadership teams. I have full confidence
investor relations and acquisitions, and our abilities that my successor, Bob Eversole, will be a great leader
are enhanced by his presence. The board is also in his new role as Board Chair. Agriculture
proposing that shareholders approve a new director,
Kelly Gast, at the July 2022 annual shareholder Sincerely, 7%
ADS Sales Growth
meeting. Kelly currently serves as the Chief Financial Infrastructure
Officer of Bayer’s Crop Science division, bringing broad Construction Non-Residential Non-Residential
Construction +43% Construction
financial experience from her leadership positions at 7%
Bayer, as well as business strategy and commercial 49%
Residential
+46%
%
expertise. ADS governance is strengthened with Construction
C. Robert Kidder
these two leaders.
Chairman of the Board of Directors Infrastructure
+35%
of Domestic Construction
Sales
+8% Agriculture
Residential
Construction
37%

1
EBITDA adjustments exclude one-time transaction costs and certain non-cash items; Adjusted EBITDA is a Non-GAAP measure. Please see “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” section of the accompanying Form 10-K for the definitions of non-GAAP measures and reconciliation of non-GAAP
measures to GAAP measures.

4 | ADS Annual Report 2022 ADS Annual Report 2022

 Industry Leading Recycling Solutions Fiscal 2022 Sustainability Highlights

Environmental

31% decrease 602 million

in GHG emissions pounds of
Largest 770 million intensity plastic recycled

plastic recycling company pounds

in North America of GHG emissions 59% 22% decrease
avoided of pipe revenue derived in energy intensity
from re-manufactured
products

Operational
GHG emissions avoided
amounts to taking
Consumed
28%
74,000 cars of the recycled HDPE
off the road bottles in the US in 2021 TRIR
15% improvement
in total recordable
incident rate (TRIR) Partnership established in 2022

3% increase 13% reduction

in miles per gallon in fuel consumption

Sustainability is at the core

of who we are and what we do.
We are proud of the important work we are doing to have a positive environmental, operational
Social & Governance
and social impact. We are the largest plastic recycling company in North America. In Fiscal 2022,
we purchased over 600 million pounds of recycled plastic, keeping it out of landfills and further
preventing over 770 million pounds of Greenhouse Gas emissions (GHG) from being released $2 million Sustainability
into the atmosphere. Our industry-leading resin blending programs convert this recycled plastic contributed
to charitable
Committee
into pipe, chambers and other products that can support America’s stormwater management established in 2022 by Board
organizations of Directors
and onsite septic needs.

50%
of FY22 director hires
and promotions were Partnership established in 2022
diverse candidates

ADS Annual Report 2022 ADS Annual Report 2022 | 7

 Industry Leading Recycling Solutions Fiscal 2022 Sustainability Highlights

Environmental

31% decrease 602 million

in GHG emissions pounds of
Largest 770 million intensity plastic recycled

plastic recycling company pounds

in North America of GHG emissions 59% 22% decrease
avoided of pipe revenue derived in energy intensity
from re-manufactured
products

Operational
GHG emissions avoided
amounts to taking
Consumed
28%
74,000 cars of the recycled HDPE
off the road bottles in the US in 2021 TRIR
15% improvement
in total recordable
incident rate (TRIR) Partnership established in 2022

3% increase 13% reduction

in miles per gallon in fuel consumption

Sustainability is at the core

of who we are and what we do.
We are proud of the important work we are doing to have a positive environmental, operational
Social & Governance
and social impact. We are the largest plastic recycling company in North America. In Fiscal 2022,
we purchased over 600 million pounds of recycled plastic, keeping it out of landfills and further
preventing over 770 million pounds of Greenhouse Gas emissions (GHG) from being released $2 million Sustainability
into the atmosphere. Our industry-leading resin blending programs convert this recycled plastic contributed
to charitable
Committee
into pipe, chambers and other products that can support America’s stormwater management established in 2022 by Board
organizations of Directors
and onsite septic needs.

50%
of FY22 director hires
and promotions were Partnership established in 2022
diverse candidates

6 | ADS Annual Report 2022 ADS Annual Report 2022

 Case Studies

GREYLINE STATION FRANCISCO STREET RESERVOIR

Lexington, KY | 2022 (ongoing) San Francisco, CA | 2021-2022

INSTALLATION AFTER INSTALLATION

INSTALLATION

As the 100-year-old Greyline Station, a former bus garage in downtown Lexington, was redeveloped When the Francisco Street Reservoir site was being redeveloped, keeping it as a natural resource that
and opened in 2020 as a mixed-use space including retail, an event venue, restaurants, a public harvested rainwater was a top priority. The 4.5 acre Francisco Park features a picnic area, dog run,
market and even a radio station, stormwater retention and offsetting was a concern. With room for community garden, reservoir interpretive area, children’s playground and restrooms. Underneath the
new construction at a premium, Lexington saw that the Greyline project could serve as a model for large central open area is a stormwater capture and reuse system comprised of HP Storm, N-12 Pipe,
sustainable redevelopment of existing buildings. Stantec, Inc., the global engineering firm, was given Nyloplast and StormTech that will perpetually provide water for the park’s irrigation and toilets.
the assignment to improve water quality while reducing the impact of flooding from impervious
“The reservoir is on a slope that is just under 20 percent. It’s a very challenging site from a variety of
surfaces typically found in a city setting.
perspectives,” explained Cody Anderson, P.E., Principal of Sherwood Design Engineers (San Francisco) and
“Our goal,” explained Samuel Lee, P.E., Stantec’s Lexington, Kentucky office lead engineer on the responsible for the stormwater system.
project, “was to remove and retrofit existing impervious surface areas with permeable alternatives such
ADS StormTech chambers provided the best ratio of storage volume to footprint area.
as turf grass and pavers. The system would capture, retain, infiltrate, and recycle rainwater runoff, and
have a detention system that would attenuate peak discharges and reduce runoff velocities.” In this project, standard StormTech chambers were deployed in a unique way to solve this engineering
challenge. StormTech chambers come in a wide range of sizes, making it easy to install for all conditions,
To detain stormwater runoff and remove suspended pollutants, Lee used 12- and 15-inch ADS N-12®
including small chambers for shallow invert depths, and large chambers for reduced footprints. They’re
high-density polyethylene (HDPE) pipe from ADS, with ADS Nyloplast® EnviroHoods™ to prevent the
also highly adaptable and can be configured around obstacles and afford multiple inlet and outlet
outflow of floating debris and oil.
positions. An additional benefit is that StormTech chambers can be maintained using standard sewer
The Greyline project will also serve as stormwater educational center for local universities, engineers, cleaning equipment.
contractors, surrounding municipalities and other local organizations including the Kentucky
Stormwater Association, which will give tours of Greyline during its conferences and meetings. There is
a permanent educational display to explain the stormwater system and its resulting benefits to visitors.

ADS Annual Report 2022 ADS Annual Report 2022 | 9

 Case Studies

GREYLINE STATION FRANCISCO STREET RESERVOIR

Lexington, KY | 2022 (ongoing) San Francisco, CA | 2021-2022

INSTALLATION AFTER INSTALLATION

INSTALLATION

As the 100-year-old Greyline Station, a former bus garage in downtown Lexington, was redeveloped When the Francisco Street Reservoir site was being redeveloped, keeping it as a natural resource that
and opened in 2020 as a mixed-use space including retail, an event venue, restaurants, a public harvested rainwater was a top priority. The 4.5 acre Francisco Park features a picnic area, dog run,
market and even a radio station, stormwater retention and offsetting was a concern. With room for community garden, reservoir interpretive area, children’s playground and restrooms. Underneath the
new construction at a premium, Lexington saw that the Greyline project could serve as a model for large central open area is a stormwater capture and reuse system comprised of HP Storm, N-12 Pipe,
sustainable redevelopment of existing buildings. Stantec, Inc., the global engineering firm, was given Nyloplast and StormTech that will perpetually provide water for the park’s irrigation and toilets.
the assignment to improve water quality while reducing the impact of flooding from impervious
“The reservoir is on a slope that is just under 20 percent. It’s a very challenging site from a variety of
surfaces typically found in a city setting.
perspectives,” explained Cody Anderson, P.E., Principal of Sherwood Design Engineers (San Francisco) and
“Our goal,” explained Samuel Lee, P.E., Stantec’s Lexington, Kentucky office lead engineer on the responsible for the stormwater system.
project, “was to remove and retrofit existing impervious surface areas with permeable alternatives such
ADS StormTech chambers provided the best ratio of storage volume to footprint area.
as turf grass and pavers. The system would capture, retain, infiltrate, and recycle rainwater runoff, and
have a detention system that would attenuate peak discharges and reduce runoff velocities.” In this project, standard StormTech chambers were deployed in a unique way to solve this engineering
challenge. StormTech chambers come in a wide range of sizes, making it easy to install for all conditions,
To detain stormwater runoff and remove suspended pollutants, Lee used 12- and 15-inch ADS N-12®
including small chambers for shallow invert depths, and large chambers for reduced footprints. They’re
high-density polyethylene (HDPE) pipe from ADS, with ADS Nyloplast® EnviroHoods™ to prevent the
also highly adaptable and can be configured around obstacles and afford multiple inlet and outlet
outflow of floating debris and oil.
positions. An additional benefit is that StormTech chambers can be maintained using standard sewer
The Greyline project will also serve as stormwater educational center for local universities, engineers, cleaning equipment.
contractors, surrounding municipalities and other local organizations including the Kentucky
Stormwater Association, which will give tours of Greyline during its conferences and meetings. There is
a permanent educational display to explain the stormwater system and its resulting benefits to visitors.

8 | ADS Annual Report 2022 ADS Annual Report 2022

 Board of Directors Executive Officers

Robert Kidder Scott Barbour

Chairman Director, President and
Chief Executive Officer
Scott Barbour
Director, President and Scott A. Cottrill About Advanced
Chief Executive Officer Executive Vice President,
Chief Financial Officer, Secretary Drainage Systems, Inc.
Anesa Chaibi
President and CEO Darin Harvey
Coolsys, Inc. Executive Vice President, Supply Chain

Brian King Advanced Drainage Systems is a leading provider of innovative water management solutions in
Michael Coleman
Executive Vice President the stormwater and onsite septic wastewater industries, providing superior drainage solutions
Partner
Product Management and Marketing for use in the construction and agriculture marketplace. For over 50 years, the Company
Ice Miller LLP
has been manufacturing a variety of innovative and environmentally friendly alternatives to
Robert M. Eversole Robert M. Klein traditional materials. Its innovative products are used across a broad range of end markets and
Managing Partner Executive Vice President, applications, including non-residential, residential, infrastructure and agriculture applications.
Stonehenge Partners, Inc. Market Management
The Company has established a leading position in many of these end markets by leveraging its
national sales and distribution platform, overall product breadth and scale and manufacturing
Alexander R. Fischer Roy E. Moore, Jr.
excellence. Founded in 1966, the Company operates a global network of approximately 70
Former President and Chief Executive Officer Executive Vice President, Infiltrator
manufacturing plants and 38 distribution centers. To learn more about ADS, please visit the
Columbus Partnership
Kevin C. Talley Company’s website at [Link].
Tanya Fratto Executive Vice President and
Retired President and Chief Executive Officer Chief Administrative Officer
General Electric Superabrasives
Michael Huebert
M.A. (Mark) Haney Senior Vice President, Sales
Retired Executive Vice President of Olefins
and Polyolefins Thomas Waun
Chevron Phillips Chemical Company LP Senior Vice President, International
Product Development and Material Sciences
Ross M. Jones
Managing Director
Berkshire Partners
Chairman Emeritus
Carl A. Nelson, Jr.
Retired Managing Partner Joe Chlapaty
Arthur Andersen Chlapaty Investments LLC
Manuel J. Perez de la Mesa Retired Chairman, President and
Retired President and Chief Executive Officer Chief Executive Officer
Pool Corporation Advanced Drainage Systems

Anil Seetharam
Managing Director
Berkshire Partners

ADS Annual Report 2022 ADS Annual Report 2022 | 11

 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NO.: 001-36557

ADVANCED DRAINAGE SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware 51-0105665
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

4640 Trueman Boulevard, Hilliard, Ohio 43026

(Address of principal executive offices and zip code)
(614) 658-0050
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.01 par value per share

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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, 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 Filer ☒ Accelerated Filer ☐

Non-Accelerated Filer ☐ Smaller 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. Yes ☒ No ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the shares of common stock held by non-affiliates of the registrant (treating all executive officers and directors of the
registrant, for this purpose, as affiliates of the registrant) was $6,032 million as of September 30, 2021, the last business day of the registrant’s most
recently completed second fiscal quarter, based on the reported closing price of the shares of common stock as reported on the New York Stock Exchange
on September 30, 2021.
As of May 10, 2022, the registrant had 84,353,682 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 May 10, 2022, 244,685 shares of unvested restricted common stock were outstanding and a
total of 84,598,367 shares of common stock were outstanding, inclusive of outstanding shares of unvested restricted common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this report incorporates by reference specific portions of the Registrant’s Notice of Annual Meeting and Proxy Statement relating to the Annual
Meeting of Stockholders to be held on July 21, 2022.

F-1
 TABLE OF CONTENTS
Page
PART I

Item 1. Business 3

Item 1A. Risk Factors 14

Item 1B. Unresolved Staff Comments 24

Item 2. Properties 24

Item 3. Legal Proceedings 24

Item 4. Mine Safety Disclosures 24

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities 25

Item 6. Reserved 26

Cautionary Statement About Forward-Looking Statements 27

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 42

Item 8. Financial Statements and Supplementary Data 43

Item 9. Changes in and Disagreements with Accountant on Accounting and Financial Disclosure 43

Item 9A. Controls and Procedures 43

Item 9B. Other Information 44

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 44

PART III

Item 10. Directors, Executive Officers and Corporate Governance 45

Item 11. Executive Compensation 45

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters 45

Item 13. Certain Relationships and Related Transactions, and Director Independence 45

Item 14. Principal Accountant Fees and Services 45

PART IV

Item 15. Exhibits and Financial Statement Schedules 46

Item 16. Form 10-K Summary 50

ii
Advanced Drainage Systems, Inc.

PART I

Item 1. Business

COMPANY OVERVIEW

Unless the context otherwise indicates or requires, as used in this Annual Report on Form 10-K, 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. The term “Infiltrator” refers to Infiltrator Water Technologies Ultimate Holdings, Inc., our
wholly owned subsidiary.

ADS is the leading manufacturer of innovative water management solutions in the stormwater and onsite septic wastewater
industries, providing superior drainage solutions for use in the construction and agriculture marketplaces. Our innovative
products are used across a broad range of end markets and applications, including non-residential, infrastructure and
agriculture applications. We have established a leading position in many of these end markets by leveraging our national
sales and distribution platform, industry-acclaimed engineering support, overall product breadth and scale plus
manufacturing excellence.

We believe the ADS brand has long been associated with quality products and market-leading performance. Our
trademarked green stripe, which is prominently displayed on many of our products, serves as clear identification of our
commitment to the customers and markets we serve, and fortifies our brand recognition and presence.

Our approach to water management is based on four basic areas - Capture, Conveyance, Storage, and Treatment - to
manage the lifecycle of a raindrop from the moment water hits the ground until it is released back into the ecosystem. Our
product portfolio is built around each step of this lifecycle. Our solutions safely and efficiently manage stormwater with
environmentally friendly products. We believe we are the only water management solutions company that manages
stormwater from when the rain first hits the ground until the moment it is returned to lakes and streams.

• Capture: As the first step in preserving the planet’s most precious resource, water, our products collect and direct
stormwater runoff on project sites and roads to an underground conveyance system.
• Conveyance: To prevent flooding at job sites, which could lead to significant structural and environmental
problems, our pipe, fittings and other products safely move stormwater away from developed sites to be
reintroduced back into the water cycle.
• Storage: To mitigate erosion and flooding, our retention and detention systems manage infiltration and recharge
stormwater prior to the treatment process.
• Treatment: Our water quality products remove trash, debris and pollutants from the stormwater runoff and septic
systems, ensuring only clean water is discharged back into our communities.

We estimate that the storm water industry, annually, is an approximately $6 billion industry. We estimate that the onsite
septic market is a roughly $1 billion industry and that approximately 30% of new North American single-family homes
utilize septic systems. On a combined basis, we estimate that we had an addressable market opportunity of approximately
$7 billion.

3
Advanced Drainage Systems, Inc.

As illustrated in the charts below, we provide a broad range of high performance thermoplastic corrugated pipe and related
water management products to a highly diversified set of end markets and geographies.

Fiscal 2022 Revenue

SEGMENT INFORMATION

For a discussion of segment and geographic information, see “Note 18. Business Segment Information” to our audited
consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

OUR PRODUCTS

We design, manufacture and market a complete line of high performance thermoplastic corrugated pipe and related water
management products for use in a wide range of end markets. Our product line includes: single, double and triple wall
corrugated polypropylene and polyethylene pipe (or “Pipe”), plastic leachfield chambers and systems, septic tanks and
accessories (or “Infiltrator”), and a variety of additional water management products (“Allied Products & Other”)
including: storm retention/detention and septic chambers (or “Chambers”); polyvinyl chloride drainage structures (or
“Structures”); fittings (or “Fittings”); and water quality filters and separators (or “Water Quality”). We also sell various
complementary products distributed through resale agreements, including geotextile products, drainage grates and other
products (or “Other Resale”). The table below summarizes the percentage of Net Sales for Pipe, Infiltrator and Allied
Products & Other.

2022 2021 2020

Pipe 55.6 % 53.1 % 56.9 %
Infiltrator 16.6 % 16.6 % 10.1 %
International 7.4 % 8.0 % 8.9 %
Allied Products & Other 20.4 % 22.3 % 24.1 %

Our products and engineering project designs have been continuously and frequently recognized by the industry. This
includes being honored many times during the past decade as the Plastics Pipe Institute’s Project of the Year. We have won
numerous awards from organizations such as the Wisconsin Department of Natural Resources for our local recycling
program, the American Society of Testing & Materials (“ASTM”), the American Society of Civil Engineers, and many
others.

4
Advanced Drainage Systems, Inc.

Pipe

Dual Wall Corrugated Pipe - Our N-12 pipe is a dual wall high-density polyethylene (“HDPE”) pipe with a corrugated
exterior for strength and a smooth interior wall for hydraulics and flow capacity. Our N-12 pipe competes in the storm
sewer and drainage markets that are also served by concrete pipe. Our N-12 pipe is available in a wide range of diameters
and sections of length. N-12 provides joint integrity, with integral bell and spigot joints for fast push-together installations
and is sold either with watertight or soil-tight coupling and fitting systems.

Our corrugated polyethylene pipe offers many benefits including ease of installation, job-site handling and resistance to
corrosion and abrasion. Corrugated pipe can easily be cut or coupled together, providing precise laying lengths while
minimizing installation waste and difficulty.

HP Storm Pipe and SaniTite HP Pipe - Our HP Storm pipe utilizes polypropylene (“PP”) resin, which provides (i)
increased pipe stiffness relative to HDPE; (ii) higher Environmental Stress Crack Resistance (“ESCR”); and (iii) improved
thermal properties, which improves joint performance. These improved physical characteristics result in a reduced need for
select backfill, which creates installation savings for customers and expands the range of possible product applications.

Our SaniTite HP pipe utilizes the same polypropylene resins as our HP Storm pipe but includes a smooth third exterior
wall in 30” to 60” pipe. The highly engineered polypropylene resin along with the triple wall design enables SaniTite HP to
surpass the stiffness requirement for sanitary sewer applications. SaniTite HP offers cost and performance advantages
relative to reinforced concrete pipe (such as improved hydraulics and better joint integrity) and polyvinyl chloride (“PVC”)
pipe (such as impact resistance).

Single Wall Corrugated Pipe - Our single wall corrugated HDPE pipe is ideal for drainage projects where flexibility, light
weight and low cost are important. Single wall HDPE pipe products have been used for decades in agricultural drainage,
highway edge drains, septic systems and other construction applications. In the agricultural market, improved technology
has highlighted the favorable impact of drainage on crop yields. For homeowners, it is an economical and easily installed
solution for downspout run-off, foundation drains, driveway culverts and general lawn drainage. Single wall pipe is also
used for golf courses, parks and athletic fields to keep surfaces dry by channeling away excess underground moisture.

Standard single wall products are available in a wide range of diameters and sold in varying lengths. Pipe can be either
perforated or non-perforated depending on the particular drainage application.

Triple Wall Corrugated Pipe and Smoothwall HDPE Pipe - Our ADS-3000 Triple Wall pipe, small diameter triple wall
corrugated pipe, consists of a corrugated polyethylene core molded between a smooth white outer wall and a smooth black
inner wall. This combination of the three wall design adds strength and stiffness, while reducing weight as compared to
PVC 2729. Triple Wall is produced and sold through our distribution network. We also manufacture smoothwall HDPE
pipe that are sold into the residential drainage and onsite septic systems markets.

Infiltrator

Infiltrator is the leading designer and manufacturer of highly engineered plastic chambers, synthetic aggregate leachfields,
combined treatment and dispersal systems, plastic tanks, active treatment systems, and related accessories that are used in
septic systems and decentralized commercial wastewater treatment systems. The onsite wastewater (septic) market is
heavily reliant on rural homes and communities that do not have access to centralized sewer and will require an onsite
wastewater or septic solution. Onsite wastewater technologies are scalable and can easily meet the needs of churches,
schools, light commercial and small community construction projects.

Leachfield Products – Our Quick4 and Arc line of septic leachfield chambers are injection molded using recycled
polyolefin materials. There are Quick4 chamber models available to meet a wide variety of regulatory and market needs.
There are Arc chamber models available to meet a majority of regulatory and market needs. The Quick4 and Arc chambers
are engineered for strength and performance, easy to install, and offer the user greater design flexibility, including a smaller
footprint, as compared with traditional stone and pipe products. The product advantages are cost savings on labor, materials
and time savings on the job.

EZflow - EZflow synthetic aggregate bundles replace stone and pipe leachfields for effluent and drainage applications. The
EZflow proprietary products are a modular design that incorporates recycled polystyrene aggregate bundles and corrugated
polyethylene pipe that act as a replacement to the traditional materials stone and pipe.

5
Advanced Drainage Systems, Inc.

Tank Products – Our IM-Series line of septic tanks are injection-molded polypropylene plastic tanks manufactured from
recycled materials. IM-Series septic tanks are available in various capacities for wastewater storage. Our IM-Tank is the
only two-piece construction, injection molded tank design in North America. In comparison to traditional concrete tanks,
our IM-Series septic tanks are easier to transport to the jobsite and require less time and energy to install.

Our IM-Series line of potable tanks are injection-molded polypropylene plastic tanks manufactured from virgin materials
suitable for water reuse and drinking water storage. IM-Series potable tanks are available in various capacities for water
storage. IM-Series potable tanks are commonly used in water cistern applications, such as rainwater harvesting systems.

Delta Treatment Systems – Our Delta Treatment Systems’ (“Delta”) wastewater treatment systems provide a higher level of
wastewater purification through mechanical aeration wastewater for residential and commercial systems with daily flows
up to 100,000 gallons per day.

Presby Treatment Dispersal Systems - Our Presby Environmental Enviro-Septic and Advanced Enviro-Septic systems are
proprietary combined treatment and dispersal systems made with a twelve-inch diameter corrugated extrusion product that
is encapsulated in fibrous materials and geotextiles. These systems when installed in a bed of sand provide combined
treatment and dispersal in the same small footprint and at a reduced cost with minimal long-term maintenance. .

Advanced Treatment Leachfield - Our Advanced Treatment Leachfield (“ATL”) product is an alternative combined
treatment and dispersal system that provides advanced wastewater treatment. The ATL is a profile of polystyrene
aggregates and geotextiles installed in a bed of sand.

Allied Products & Other

We produce a range of Allied Products that are complementary to our Pipe products. Our Allied Products offer adjacent
technologies to our core Pipe offering, presenting a complete drainage solution for our clients and customers. This
combination of Pipe and Allied Products is a key strategy in our sales growth, profitability and market share penetration.
The practice of selling a drainage system is attractive to both distributors and end users, by providing a broad package of
products that can be sold on individual projects and strengthens our competitive advantage in the marketplace. We
aggressively seek and evaluate new products, technologies and regulatory changes that impact our customers’ needs for
Allied Products.

The underground construction industry has historically been project (not product) driven, creating the impetus for owners,
engineers and contractors to seek manufacturers that deliver solution-based product portfolios. Many of the components of
underground construction are related and require linear compatibility of function, regulatory approval and technology.

Storm Chambers - Our StormTech chambers are used for stormwater retention, detention and “first flush” underground
water storage on non-residential site development and public projects. These highly engineered chambers are injection
molded from HDPE and PP resins into a proprietary design which provides strength, durability, and resistance to corrosion.
The chambers allow for the efficient storage of stormwater volume, reducing the underground construction footprint and
costs to the contractors, developers, and property owners. The chambers are open bottom, which allows for high density
stacking in both storage and shipment. This freight-efficient feature drives favorable cost-competitiveness in serving long-
distance export markets. These chamber systems typically incorporate our other product lines such as corrugated pipe,
fabricated fittings, water quality units and geotextiles.

Structures - Our Nyloplast PVC drainage structures are used in non-residential, residential and municipal site development,
road and highway construction, as well as landscaping, recreational, industrial and mechanical applications. The product
family includes inline drains, drain basins, curb inlets and water control structures which move surface-collected
stormwater vertically down to pipe conveyance systems. These custom structures are fabricated from sections of PVC pipe
using a thermo-forming process to achieve exact site-specific hydraulic design requirements. Our Nyloplast products are a
preferred alternative to heavier and larger concrete structures, by offering greater design flexibility and improved ease of
installation which reduces overall project costs and timelines. The structures incorporate rubber gaskets to ensure
watertight connections, preventing soil infiltration which plagues competitive products.

Fittings - We produce fittings and couplings utilizing blow molding, injection molding and custom fabrication on our pipe
products. Our innovative coupling and fitting products are highly complementary to our broader product suite, and include
both soil-tight and water-tight capabilities across the full pipe diameter spectrum. Our fittings are sold in all end markets
where we sell our current pipe products.

6
Advanced Drainage Systems, Inc.

Other Products - Our ARC and BioDiffuser products are chambers that are used in septic systems for residential and small
volume non-residential wastewater treatment and disposal. The innovative design of our ARC chamber is generally
approved for a footprint reduction, further reducing the cost of the septic system. Injection-molded from HDPE, these
products are strong, durable, and chemical-resistant. These interconnecting chambers are favored by septic contractors
because they are lightweight, easy to install and offer articulating features which increase site-specific design flexibility.
The ARC chamber products are manufactured by Infiltrator.

Our Water Quality (formerly BaySaver) product line targets the removal of sediment, debris, oils and suspended solids
throughout a stormwater rain event by separating and/or filtering unwanted pollutants.

We purchase and distribute construction fabrics and other geosynthetic products for soil stabilization, reinforcement,
filtration, separation, erosion control, and sub-surface drainage. Constructed of woven and non-woven PP, geotextile
products provide permanent, cost-efficient site-development solutions. Construction fabrics and geotextiles have
applications in all of our end markets.

Our Inserta Tee product line consists of a PVC hub, rubber sleeve and stainless steel band. Inserta Tee is compression fit
into the cored wall of a mainline pipe and can be used with all pipe material types and profiles. This product offers an easy
tap-in to existing sanitary and storm sewers by limiting the excavation needed for installation compared to competitive
products.

RAW MATERIALS AND SUPPLIERS

Virgin HDPE and PP resins are derivatives of ethylene and propylene, respectively. Ethylene and propylene are derived
from natural gas liquids or crude oil derivatives primarily in the U.S. We currently purchase in excess of 1.3 billion pounds
of virgin and recycled resin annually from approximately 500 suppliers. As a high-volume buyer of resin, we achieve
economies of scale to negotiate favorable terms and pricing. Our purchasing strategies differ based on the material (virgin
resin versus recycled material) ordered for delivery to our production locations.

The price movements of the different materials also vary, resulting in the need to use strategies to reduce volatility and
successfully pass on cost increases to our customer through timely selling price increases when needed.

We have relationships with most of the North American producers of virgin high-density polyethylene and impact
copolymer polypropylene producers that manufacture the grades we need to produce our products. The North American
capacity for ethylene derivatives has been expanded primarily as a result of supplies of natural gas liquids being produced
through sustained oil and gas exploration and production.

We are focused on a program of continuous sustainability improvement, with approximately 600 million pounds of post-
consumer recycled high-density polyethylene (“HDPE”) currently used to make our products. This industry-leading
program keeps millions of used bottles out of the landfill and puts them to work again for more than a hundred years as part
of our infrastructure.

We leverage our raw material blending and processing technologies to produce an HDPE pipe that incorporates recycled
resin. These products, which meet an ASTM International standard and an American Association of State Highway and
Transportation Officials standard, replaces a majority of the virgin resin that is used with optimized recycled materials.
ADS Recycling procures and processes recycled raw materials that can be used in products we produce and sell. On
December 3, 2021, we completed the acquisition of Jet Polymer Recycling, Inc. (“Jet”). The acquisition of Jet expands the
Company’s plastic recycling capabilities to support future growth. Jet is the largest supplier of recycled polypropylene
plastic for Infiltrator.

We maintain relationships with several of the largest environmental companies which provide us with post-consumer
HDPE recycled materials. We also maintain relationships with several key post-industrial HDPE suppliers which provide
us with materials that cannot otherwise be utilized in their respective production processes.

We are one of the largest domestic recyclers of HDPE. We believe that we are well positioned for future growth as we add
additional recycled material processing facilities, add capacity to existing facilities, and expand our supplier base for virgin
resin. We anticipate continued growth in the availability of ethylene and propylene which are used to manufacture HDPE
and PP, respectively.

7
Advanced Drainage Systems, Inc.

OUR MANUFACTURING AND DISTRIBUTION PLATFORM

We have a leading domestic and international manufacturing and distribution infrastructure, serving customers throughout
the United States, Canada, Mexico and other countries worldwide through 70 manufacturing plants and 38 distribution
centers, including eight manufacturing plants and nine distribution centers owned or leased by our joint ventures. We
manufacture our corrugated pipe products using a continuous extrusion process, where molten polyethylene or
polypropylene is pushed through a die into a moving series of corrugated U-shaped molds. We utilize customized and
proprietary production equipment, which we believe is faster and more cost efficient than other pipe making equipment
generally available in the market.

Domestically, we can produce more than one billion pounds of pipe annually. Additional capacity is in place to support
seasonal production needs and expected growth. Our production equipment is built to accept transportable molds and die
tooling over a certain range of sizes so each plant is not required to house the full range of tooling at any given time. This
transportability provides us with the flexibility to optimize our capacity through centrally coordinated production planning,
which helps to adapt to shifting sales demand patterns while reducing the capital needed for tooling. With our large
manufacturing footprint in place, we can support rapid seasonal growth in demand, focusing on customer service while
minimizing transportation costs.

Our manufacturing plants have no material process-related by-products released into the atmosphere, waterways, or solid
waste discharge. During pipe production start-ups and size changeovers, non-compliant scrap and any damaged finished
goods pipe are recycled through a grinder for internal re-use.

The standard fittings products (tees, wyes, elbows, etc.) that we produce and sell to connect our pipe on jobsites are blow
molded or injection molded at three domestic plants. In addition, customized fabricated fittings (e.g., more complex dual
wall pipe reducers, bends or structures) are produced in 20 of our North American plants. A wide variety of production
processes and expertise allow us to provide cost-effective finished goods at competitive prices delivered in a timely fashion
to our customers.

We produce storm and septic chambers, tanks and accessories using injection molding machines ranging in size. Our molds
and machines have been designed to maximize interchangeability to optimize flexibility, maximize efficiency and
minimize downtime.

International Presence – We own manufacturing facilities in Canada to produce our products for sale in the Canadian
markets. We serve international markets primarily in Mexico, Central America and South America through joint venture
operations with local partners. Our joint venture strategy has provided us with local and regional access to key markets
such as Mexico, Brazil, Chile, Argentina, and Peru. Our international joint ventures produce pipe and related products to be
sold in their respective regional markets. We also have wholly-owned subsidiaries that distribute our pipe and related
products in Europe and the Middle East. Combining local partners’ customer relationships, brand recognition and local
management talent, with our world-class manufacturing and process expertise, broad product portfolio and innovation
creates a powerful solution driven platform and opportunities for continued profitable international expansion.

Quality Assurance Control - We have two internal quality assurance control laboratory facilities equipped and staffed to
evaluate and confirm incoming raw material and finished goods quality in addition to the quality testing that is done at our
manufacturing facilities. We conduct annual safety, product and process quality audits at each of our facilities, using
centralized internal resources in combination with external third-party services. In the quality area, various national and
international agencies such as National Transportation Product Evaluation Program (“NTPEP”), International Association
of Plumbing and Mechanical Officials (“IAPMO”), Bureau de normalisation du Québec (“BNQ”), Intertek for Canadian
Standards Association (“CSA”), Entidad Mexicana de Acreditacion A.C. (“EMA”) and NSF International and several state
Departments of Transportation (“DOT”) and municipal agencies conduct both scheduled and unscheduled audits/
inspections of our plants to verify product quality and compliance to applicable standards.

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Advanced Drainage Systems, Inc.

Fleet – We also operate an in-house fleet of approximately 700 tractors. Our effective shipping radius is approximately 300
miles from one of our manufacturing plants or distribution centers. The combination of a dedicated fleet and team of
company drivers allows greater flexibility and responsiveness in meeting dynamic customer jobsite delivery expectations.
We strive to achieve less than three-day lead-time on deliveries and have the added benefit of redeploying fleet and driver
assets to respond to short-term regional spikes in sales activity. For deliveries that are outside an economic delivery radius
of our truck fleet, common carrier deliveries are tendered to a third-party control tower to ensure that lowest delivered
freight costs are achieved while maintaining high levels of customer service. In addition, we are committed to continuously
upgrading our tractors with state-of-the-art safety features, fuel economy, and digital technology to attract the driver of the
future, reduce our total emissions and keep our drivers safe on and off the road.

Our North American truck fleet incorporates approximately 1,300 trailers that are specially designed to haul our
lightweight pipe and Allied products. These designs maximize payload versus conventional over the road trailers and
facilitate the loading and unloading of our products at the various customer delivery locations. The new trailer design
assists in managing the fuel efficiency of our fleet by decreasing total trailer weight and aerodynamic design. The scope of
fleet operations also includes backhaul throughout our network to lower our total delivered cost and increase our asset
utilization.

Facility Network - Our scale and extensive network of Pipe and Allied Products facilities provide a critical cost advantage
versus our competitors, as we are able to more efficiently transport products to our customers and end users and to promote
faster product shipments due to our proximity to the delivery location. The optimized design of our Infiltrator chambers
and tanks provide the ability to nest products, enabling us to manufacture products from one location and efficiently ship
throughout North America.

SALES AND MARKETING

We believe we have one of the largest and most experienced sales and engineering forces in the industry. Offering the
broadest product line in the industry enables our sales force to source the greatest number of new opportunities and more
effectively cross-sell products than any of our competitors. We consistently maintain thousands of touch points with
customers, civil engineers and municipal authorities, continuously educating them on new product innovations and their
advantages relative to traditional products. We believe we are the industry leader in these efforts, and we view this work as
an important part of our marketing strategy, particularly in promoting N-12 and SaniTite HP for storm and sanitary sewer
systems, as regulatory approvals are essential to the specification and acceptance of these product lines.

Our sales and marketing strategy is divided into four components — comprehensive market coverage, diverse product
offerings, readily-available local inventory and specification efforts. Our goal is to provide the distributor/owner with the
most complete, readily available product line in our industry. We strive to use our manufacturing footprint, product
portfolio and market expertise to efficiently service our customers.

Our sales and engineering objective is to influence, track and quote all selling opportunities as early in the project life cycle
as possible. We strive to be meaningfully involved in all phases of the project cycle, including design, bidding, award and
installation. Conceptual project visibility allows sales and engineering professionals the ability to influence design
specifications and increase the probability of inclusion of our products in bid documents. The inclusion of our products in
bid documents improves the probability of completing the sale. On-demand installation support allows us to maintain
customer relationships and ensure positive installation experience. In addition to direct channel customers, we also
maintain and develop relationships with federal agencies, municipal agencies, national standard regulators, private
consulting engineers and architects. Our consistent interaction with these market participants enables us to continue our
market penetration. This ongoing dialogue has positioned us as an industry resource for design guidance and product
development and as a respected expert in water management solutions.

CUSTOMERS

We have a large, active customer base of approximately 17,000 customers, with two customers representing 10% or more
of fiscal 2022 net sales. Ferguson Enterprises (“Ferguson”) accounted for 13.0% and Core and Main accounted for 11.3%
of fiscal 2022 net sales. Our customer base is diversified across the range of end markets that we serve.

A majority of our sales are made through distributors, including many of the largest national and independent waterworks
distributors, with whom we have long-standing distribution relationships and who sell primarily to the storm sewer and
sanitary sewer markets. We also utilize a network of hundreds of small to medium-sized independent distributors across the
United States. We have strong relationships with major national retailers that carry drainage products. We offer the most

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complete line of HDPE products in the industry and are the only national manufacturer that can service the "Big-Box"
retailers from coast-to-coast. We also sell to buying groups and co-ops in the United States that serve the plumbing,
hardware, irrigation and landscaping markets. Selling to buying groups and co-ops provides us a further presence on a
national, regional and local basis for the distribution of our products. Our preferred vendor status with these groups allows
us to reach thousands of locations in an effective manner. Members of these groups and co-ops generally are independent
businesses with strong relationships and brand recognition with smaller contractors and homeowners in their local markets.
The combination of our large sales force, long-standing retail and contractor customer relationships and extensive network
of manufacturing and distribution facilities complements and strengthens our broad customer and market coverage.

Our customer service organization is supplemented by the employees of our manufacturing plants, distribution centers and
drivers of our tractor-trailers. In conjunction with our field sales and engineering team, this highly trained and competent
staff allows us to maintain more customer touch points and interaction than any of our competitors.

SEASONALITY

Historically, sales of our products have been higher in the first and second quarters of each fiscal year due to favorable
weather and longer daylight conditions accelerating construction 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.

In the non-residential, residential and infrastructure markets in the northern United States and Canada, construction activity
typically begins to increase in late March and is slower in December, January and February. In the southern and western
United States, Mexico, Central America and South America, the construction markets are less seasonal.

The agricultural drainage market is concentrated in the early spring just prior to planting and in the fall just after crops are
harvested prior to freezing of the ground in winter.

PRACTICES RELATED TO WORKING CAPITAL ITEMS

Information about the Company’s working capital practices is incorporated herein by reference to “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Working Capital and
Cash Flows” of this Form 10-K.

COMPETITION

We operate in a highly fragmented industry and hold leading positions in multiple market sectors. Competition, including
our competitors and specific competitive factors, varies for each market sector.

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 HDPE pipe in the late 1980s, our pipe has been displacing traditional materials, such as reinforced
concrete, corrugated steel and PVC, across an ever-expanding range of end markets, including non-residential, residential,
agriculture and infrastructure applications. In the United States, our nationwide 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 principal competitive factors for our market sectors include local selling coverage, product availability,
breadth and cost of products, technical knowledge and expertise, customer and supplier relationships, reliability and
accuracy of service, effective use of technology, delivery capabilities and timeliness, pricing of products, and the provision
of credit. We believe that our competitive strengths and strategy allow us to compete effectively in our market sectors.

The stormwater drainage industry, in particular, is highly fragmented with many smaller specialty and regional competitors
providing a variety of product technologies and solutions. We compete against concrete pipe, corrugated steel pipe and
PVC pipe producers on a national, regional and local basis. In addition, there are many HDPE pipe producers in the United
States. We believe we are the only corrugated HDPE pipe producer with a national footprint, and our competitors operate
primarily on a regional and local level.

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INTELLECTUAL PROPERTY

We rely upon a combination of patents, trademarks, trade names, licensing arrangements, trade secrets, know-how and
proprietary technology in order to secure and protect our intellectual property rights, both in the United States and in
foreign countries.

We seek to protect our new technologies with patents and trademarks and defend against patent infringement allegations.
We hold a significant amount of intellectual property rights pertaining to product patents, process patents and trademarks.
We continually seek to expand and improve our existing product offerings through product development and acquisitions.
Although our intellectual property is important to our business operations and in the aggregate constitutes a valuable asset,
we do not believe that any single patent, trademark or trade secret is critical to the success of our business as a whole. We
cannot be certain that our patent applications will be issued or that any issued patents will provide us with any competitive
advantages or will not be challenged by third parties.

In addition to the foregoing protections, we generally control access to and use of our proprietary and other confidential
information through the use of internal and external controls, including contractual protections with employees, distributors
and others. See “Item 1A. Risk Factors - Risks Relating to Our Business - If we are unable to protect our intellectual
property rights, or we infringe on the intellectual property rights of others, our ability to compete could be negatively
impacted.”

SUSTAINABILITY

“Our Reason is Water” and our vision is to advance the quality of life through sustainable solutions to water management
challenges. We are dedicated to providing clean water management solutions to communities and delivering unparalleled
service to our customers.

We are focused on bringing highly engineered products to market that are both sustainable and resilient. These products
assist our customers in meeting sustainability targets such as LEED or ENVISION certification while also allowing them to
make needed repairs to aging infrastructure, plan for and mitigate future impacts from climate change and rapidly recover
from catastrophic events when necessary.

In fiscal 2022, we announced our 10 Year Sustainability goals. The goals are a set of targets focused on the “REASON” in
“Our reason is water” and demonstrate our commitment to leadership in environment, social and governance. The goals
include: a commitment to increase our use of recycled plastic, commit to operation clean sweep for plastic pellet
management, implement a supplier sustainability program, reduce our total recordable injury rate, implement closed-loop
water usage at all our manufacturing locations, continue our efforts in diversity, equity and inclusion and maintain
transparency in our sustainability reporting efforts. Our 10 Year Sustainability goals are available on our website. The
goals are not included as part of, or incorporated by reference, into this Annual Report on Form 10-K.

HUMAN CAPITAL RESOURCES

At the core of the Company’s 55-year history are the people, many of whom have been with the Company for several
decades. We are dedicated to fostering an inclusive culture, empowering employees and communities by embracing the
dynamics of different backgrounds, experiences and perspectives. We are committed to creating an environment where
employees feel valued, respected, and fully engaged to contribute to our future success.

The ability to recruit, retain, develop and protect our global workforce are key to our success. In addition to providing
competitive compensation and benefits, this includes the following categories: Health and Safety; Values; Diversity, Equity
& Inclusion; and Training.

Employees - As of March 31, 2022, in our domestic and international operations, the Company and its consolidated
subsidiaries had both hourly personnel and salaried employees. As of March 31, 2022, approximately 240 hourly personnel
in our Mexican joint venture were covered by collective bargaining agreements.

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March 31, 2022 March 31, 2021

Employees by Region
United States 4,945 4,340
Canada 340 340
Other 350 320
Total 5,635 5,000
Employees by Type
Hourly 3,905 3,420
Salary 1,730 1,580
Total 5,635 5,000

Health and Safety – Employee safety is our highest priority and a key component of our company culture. Our operations
follow a comprehensive, proactive safety and health management system that includes a collaborative process to find and
fix workplace hazards prior to injury occurrence. Our U.S. facilities follow all Occupational Safety and Health Act
(“OSHA”) safety and health standards, as required by law; and our Canadian facilities follow the Canadian Federation of
Construction Safety Association (“CFCSA”) Certificate of Recognition (“COR”) program, as required by law.

Our priority in response to the COVID-19 pandemic continues to be the health and safety of our employees. Deemed an
essential business, we maintain appropriate health protocols across all our facilities so we could remain open to deliver
critical water management solutions to our customers and the communities they serve. To further minimize risk, we used a
thorough case management process to work through and mitigate any potential cases.

Values – Our success as a company is built on the Honesty, Professionalism, and Core Values of our employees, directors,
and agents. These three tenets serve as the guiding principles of our Code of Business Conduct and Ethics (the “Ethics
Code”).

• Honesty: We believe in always being honest in dealing with our customers, suppliers, and others and complying
with all laws and regulations applicable to our business at all levels.
• Professionalism: We believe in providing our products and services in a prompt and professional manner, gaining
the loyalty and trust of our customers and suppliers.
• Core Values: We believe in certain “core values” centered upon ensuring quality throughout our product and
organization for long-term growth and profitability.

The Ethics Code provides a framework by which we maintain the highest ethical standards in the conduct of our business
and is an integral part of implementing our vision of ethically and sustainably maximizing value. All members of our
organization are expected to adhere to each of the policies of the Ethics Code, while also employing good ethical judgment.
The Ethics Code provides guidelines in relation to conflicts of interest, fair dealing, confidential information and
intellectual property, fair employment practices, environmental health and safety, and improper payments to third parties,
among many other areas of ethical business conduct.

Diversity, Equity and Inclusion – As a global company, we are dedicated to fostering an inclusive culture, empowering
employees and communities by embracing the dynamics of different backgrounds, experiences and perspectives. We are
committed to creating an environment where employees feel valued, respected, and fully engaged to contribute to our
future success.

We base hiring and promotional decisions on job qualifications, such as work records, performance history and length of
service, to ensure equal opportunity to all. We also ensure equal opportunity across all relevant aspects of employment such
as recruiting, job assignment, compensation, benefits, transfers, promotional opportunities, Company sponsored training,
and recreation programs, among others.

Training – Our operational and management training programs are core to our commitment and enablement of a safe and
productive manufacturing environment. Through our ADS Academy, we deliver targeted role-specific training to our
operations team members through a blended curriculum of online and hands-on training experiences covering safety,
quality, product knowledge and manufacturing process. Our learning management system, which hosts approximately 450
custom modules, serves as the foundation of our operational training programs and provides us with appropriate scale,

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efficiency, and governance to support our growth. We have a strong commitment to the training of our manufacturing
supervisors and managers in technical, management, and leadership subjects through intense role-based assimilation plans,
e-learning and classroom-based development experiences.

REGULATION

Our operations are affected by various statutes, regulations and laws in the markets in which we operate, which historically
have not had a material effect on our business. We are subject to various laws applicable to businesses generally, including
laws affecting land usage, zoning, the environment, health and safety, transportation, labor and employment practices,
competition, immigration and other matters. Additionally, building codes may affect the products our customers are
allowed to use, and, consequently, changes in building codes may affect the salability of our products. The transportation
and disposal of many of our products are also subject to federal regulations. We are subject to safety requirements
governing interstate operations prescribed by the U.S. Department of Transportation (“U.S. DOT”). Vehicle dimensions
and driver hours of service also remain subject to both federal and state regulation.

We have been able to consistently capitalize on changes in both local and federal regulatory statutes relating to storm and
sanitary sewer construction, repair and replacement. Most noteworthy is the Federal Clean Water Act of 1972 and the
subsequent EPA Phase I, II and sustainable infrastructure regulations relating to storm sewer construction, storm water
quantity, storm water quality, and combined sewer separation. Our diversity of products offering a solution-based selling
approach coupled with detailed market knowledge makes us an integral industry resource in both regulatory changes and
compliance.

An important element of our growth strategy has been our focus on industry education efforts to drive regulatory approvals
for our core HDPE products at national, state and local levels. We employ field-based engineers who work closely with
government agencies to obtain regulatory approvals for our products, and also with civil engineering firms to specify our
products on non-residential construction and road-building projects. Additional state and local regulatory approvals will
continue to present new growth opportunities in new and existing geographic markets for us. The trend of substituting
traditional materials for HDPE and PP is expected to continue as more states and municipalities recognize the benefits of
our HDPE N-12 pipe and our polypropylene HP pipe by approving it for use in a broader range of applications.

Our Infiltrator products are used primarily in onsite septic and decentralized wastewater treatment systems. The products
used in these systems cannot be sold without a regulatory approval. We have a dedicated regulatory team with a track
record of gaining favorable regulatory approvals and advancing policy and legislation. Over the past 10 years the team has
successfully embarked in over 100 regulatory initiatives increasing the addressability and size of markets across the U.S.
and Canada.

ENVIRONMENTAL, HEALTH AND SAFETY MATTERS

We are subject to a broad range of foreign, federal, state and local environmental, health and safety laws and regulations,
including those pertaining to air emissions, water discharges, the handling, disposal and transport of solid and hazardous
materials and wastes, the investigation and remediation of contamination and otherwise relating to health and safety and the
protection of the environment and natural resources. To a limited extent, our current and past operations, and those of many
of the companies we have acquired, involve materials that are, or could be classified as, toxic or hazardous. There is
inherent risk of contamination and environmental damage in our operations and the products we handle, transport and
distribute. See “Item 1A. Risk Factors — Risks Relating to Our Business — We could incur significant costs in complying
with environmental, health and safety laws or permits or as a result of satisfying any liability or obligation imposed under
such laws or permits.”

CORPORATE AND AVAILABLE INFORMATION

We were founded in 1966 and are a Delaware corporation. Our principal executive offices are located at 4640 Trueman
Boulevard, Hilliard, Ohio 43026, and our telephone number at that address is (614) 658-0050. Our corporate website is
[Link].

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to
reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, (“Exchange Act”)
are filed with the SEC. We are subject to the informational requirements of the Exchange Act and file or furnish reports,
proxy statements, and other information with the SEC. Such reports and other information filed by the Company with the
SEC are available free of charge on our website at [Link] when such reports are available on the SEC’s website.

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Advanced Drainage Systems, Inc.

We use our [Link] website as a means of disclosing material non-public information and for complying with
our disclosure obligations under Regulation FD. Accordingly, investors should monitor such portions of [Link]
in addition to following press releases, SEC filings and public conference calls and webcasts.

The contents of the websites referred to above are not incorporated into this filing. Further, our references to these websites
are intended to be inactive textual references only.

Item 1A. Risk Factors

Please carefully consider the risks described below, together with all other information included or incorporated by
reference in this Annual Report on Form 10-K. If any of the following risks actually occur, our business, financial
condition, results of operations and cash flows could be materially adversely affected. In these circumstances, the market
price of our common stock could decline significantly.

Risks Relating to Our Business

Fluctuations in the price and availability of resins, our principal raw materials, and our inability to obtain adequate
supplies of resins from suppliers and pass on resin price increases to customers could adversely affect our business,
financial condition, results of operations and cash flows.

The principal raw materials that we use in our products are virgin and recycled resins. Our ability to operate profitably
depends, to a large extent, on the markets for these resins. In particular, as resins are derived either directly or indirectly
from crude oil derivatives and natural gas liquids, resin prices fluctuate substantially as a result of changes in crude oil and
natural gas prices, changes in existing processing capabilities and the capacity of resin suppliers. Polypropylene resin
suppliers are limited, high-density polyethylene suppliers are geographically concentrated and supply of recycled resin is
also limited. Supply interruptions could arise from disruptions to existing petrochemical capacity and recycled resin
sources caused by labor disputes and shortages, weather conditions or natural disasters affecting supplies or shipments,
transportation disruptions or other factors beyond our control. An extended disruption in the timely availability of raw
materials from our key suppliers would result in a decrease in our revenues and profitability. Additionally, our customers’
production schedules could be impacted by these shortages, which could result in reduced sales of our products.

Inflation in these raw material costs could also result in significant cost increases, further affecting our business. Our ability
to maintain profitability heavily depends on our ability to pass through to our customers any increase in raw material costs,
which are a large portion of our overall product costs. If increases in the cost of raw materials, including resins, cannot be
passed on to our customers, or the duration of time associated with a pass through becomes extended, our business,
financial condition, results of operations and cash flows will be adversely affected. Conversely, in the event that there is
deflation, we may experience pressure from our customers to reduce prices. There can be no assurance that we would be
able to reduce our cost base to offset any such price concessions which could adversely impact our results of operations
and cash flows.

The COVID-19 pandemic or other pandemics in the future, could have a significant negative impact on our operations,
liquidity, financial condition and financial results.

The ongoing COVID-19 pandemic has negatively impacted the global economy, in addition to disrupting global supply
chains and workforce participation. Quarantines and “stay in place” orders, the timing and length of containment and
eradication solutions, travel restrictions, absenteeism by infected workers, labor shortages or other disruptions to our
supply chain or our customers could adversely impact our sales and operating results. While manufacturing and
manufacturing-related industries are considered an “essential service” in most jurisdictions in which we operate, site
closures or project delays have occurred and increased social distancing and health-related precautions are required on
many work sites, which may cause additional project delays and additional costs to be incurred.

To the extent that our customers and suppliers are adversely impacted by the COVID-19 pandemic, this could reduce the
availability, or result in delays, of materials or supplies, or delays in customer payments, which in turn could materially
interrupt our business operations and/or impact our liquidity.

Any disruption or volatility in general business and economic conditions in the markets in which we operate could have
a material adverse effect on the demand for our products and services.

The markets in which we operate are sensitive to general business and economic conditions in the U.S. and worldwide,
including availability of credit, interest rates, fluctuation in capital and business and consumer confidence. Furthermore, the
U.S. and global economy as well as the markets in which we operate face the adverse impact of the COVID-19 global

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pandemic, as referenced above. The difficult conditions in these markets and the overall economy affect our business in a
number of ways. For example:

• The volatility of the U.S. economy can have an adverse effect on our sales that are dependent on the non-
residential construction market if participants in this industry may postpone spending.
• Our business depends upon general activity levels in the agriculture market. The nature of the agriculture market
is such that a downturn in demand can occur suddenly, resulting in excess inventories, un-utilized production
capacity and reduced prices for pipe products. These downturns may be prolonged, and our revenue and
profitability would be harmed.
• Our business depends on the residential construction market. While new housing starts demonstrated a
compounded annual growth rate of 6.4% from 2016 to 2021, current levels remain below the long-term average of
1.4 million starts since the U.S. Census Bureau began reporting the data demand for our products and services in
this market, which in turn would result in a significant adverse effect on our financial condition and results of
operations.
• Demand for our products and services depend to a significant degree on spending on infrastructure. Infrastructure
spending is affected by a variety of factors beyond our control, including interest rates, availability and
commitment of public funds for municipal spending and highway spending and general economic conditions.
Weakness in the markets in which we operate could have a material adverse effect on our business, financial condition,
results of operations and cash flows. We may have to close under-performing facilities as warranted by general economic
conditions and/or weakness in the markets in which we operate. In addition to a reduction in demand for our products,
these factors may also reduce the price we are able to charge for our products and restrict our ability to pass raw material
cost increases to our customers. This, combined with an increase in excess capacity, will negatively impact our
profitability, cash flows and our financial condition, generally.

Demand for our products and services could decrease if we are unable to compete effectively, and our success depends
largely on our ability to convert current demand for competitive products into demand for our products.

We compete with both manufacturers of high performance thermoplastic corrugated pipe and manufacturers of alternative
products, such as concrete, steel and PVC pipe products, on the basis of a number of considerations, including product
characteristics such as durability, design, ease of installation, price on a price-to-value basis and service.

We expect that new competitors may develop over time. No assurance can be given that we will be able to respond
effectively to such competitive pressures. Increased competition by existing and future competitors could result in
reductions in sales, prices, volumes and gross margins that would materially adversely affect our business, financial
condition, results of operations and cash flows. Furthermore, our success will depend, in part, on our ability to maintain our
market share and gain market share from competitors.

Certain of our competitors have financial and other resources that are greater than ours and may be better able to withstand
price competition, especially with respect to traditional products. In addition, consolidation by industry participants could
result in competitors with increased market share, larger customer bases, greater diversified product offerings and greater
technological and marketing expertise, which would allow them to compete more effectively against us. Moreover, our
competitors may develop products that are superior to our products or may adapt more quickly to new technologies or
evolving customer requirements. In many markets in which we operate there are no significant entry barriers that would
prevent new competitors from entering the market, especially on the local level, or existing competitors from expanding in
the market.

We may be affected by global climate change or by legal, regulatory or market responses to such potential change.

Many of our products are made from a material whose manufacturing process involves the emission of carbon dioxide, a
greenhouse gas (“GHG”) that scientists have attributed as a cause of climate change. Our products require transportation
from our facilities to the site where they are used, which consumes energy. Concern over climate change, including the
impact of global warming, has led to federal, state, and international efforts to limit GHG emissions. Although it is
uncertain at this time precisely what actions various governmental bodies will take early to address the effects of climate
change and to achieve goals in response to the potential effects of climate change, including in what timeframe those
actions would be implemented, new laws or future regulations could directly and indirectly affect our customers and
suppliers (through an increase in the cost of production or their ability to produce satisfactory products) and our business
(through the impact on our inventory availability, cost of sales, operations or demands for the products we sell). Until the
timing, scope and extent of any future regulation becomes known, we cannot predict its effect on our cost structure or our

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operating results, but it is likely our costs will increase in relation to any climate change legislation and regulations
concerning GHG, which could have an adverse effect on our future financial position, results of operations or cash flows.

In January 2022, we communicated our initial 10-year goals regarding sustainability. To reduce our Environmental Impact,
we have committed to pursuing science-based targets consistent with limiting global temperature increase to 1.5°C above
pre-industrial levels. We are working to define absolute targets for reduction of scope 1 (direct) & 2 (indirect) greenhouse
gas emissions (“GHG”) that align with limiting future temperature rise to 1.5°C above baseline. These goals reflect our
current plans and there is no guarantee that they will be achieved. Our ability to achieve any goal is subject to factors and
conditions, many of which are outside of our control, including technology,or the availability of recycled resin.

Notwithstanding our commitment to advancing sustainable business practices, climate change may also have adverse
physical or financial impacts on our business to the extent that it causes more severe or more frequent major storm events,
flooding, drought-induced wildfires, or other shifts in weather patterns. Increases in the intensity and frequency of acute
weather events have been linked to climate change, and this risk may increase to the extent global warming continues or is
unabated. These types of extreme weather events may include disruptions to operations or production, disruptions to supply
chains or damage to our physical plants, which could lead to reduced financial performance of our business.

In addition, regardless of whether governmental bodies enact legislation to address climate change and reduce GHG
emissions or we achieve our 10-year goals, the public perception of carbon-intensive industries may change adversely over
time and additional focus on environmental, social and governance issues by the public and/or investors may harm our
business as it could damage our reputation, require us to expend resources in reducing our net carbon emissions, or reduce
demand for our products, which could adversely impact our results of operations and cash flows.

Our results of operations could be adversely affected by the effects of weather.

Most of our business units experience seasonal variation as a result of the dependence of our customers on suitable weather
to engage in construction projects. Generally, during the winter months, construction activity declines due to inclement
weather, frozen ground and shorter daylight hours. In addition, to the extent that hurricanes, severe storms, floods, other
natural disasters or similar events occur in the geographic regions in which we operate, our results of operations may be
adversely affected. We anticipate that fluctuations of our operations results from period to period due to seasonality will
continue in the future

The loss of any of our significant customers could adversely affect our business.

Our ten largest customers generated approximately 40% of our net sales in fiscal 2022. Because we do not have long-term
arrangements with many of our customers, such customers may cease purchasing our products without notice or upon short
notice to us. In addition, consolidation among customers could also result in a loss of some of our present customers to our
competitors. The loss of one or more of our significant customers, a significant customer’s decision to purchase our
products in significantly lower quantities than they have in the past, or deterioration in our relationship with any of them
could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Because our business is working capital intensive, we rely on our ability to manage our supply purchasing and customer
credit policies.

The majority of our net sales volume is facilitated through the extension of credit to our customers whose ability to pay is
dependent, in part, upon the economic strength of the industry in the areas where they operate. Our business units offer
credit to customers, either through unsecured credit that is based solely upon the creditworthiness of the customer, or
secured credit for materials sold for a specific job where the security lies in lien rights associated with the material going
into the job. The type of credit offered depends both on the financial strength of the customer and the nature of the business
in which the customer is involved. End users, resellers and other non-contractor customers generally purchase more on
unsecured credit than secured credit. The inability of our customers to pay off their credit lines in a timely manner, or at all,
would adversely affect our business, financial condition, results of operations and cash flows. Furthermore, our collections
efforts with respect to non-paying or slow-paying customers could negatively impact our customer relations going forward.

Our operations are working capital intensive, and our inventories, accounts receivable and accounts payable are significant
components of our net asset base. We manage our inventories and accounts payable through our purchasing policies and
our accounts receivable through our customer credit policies. If we fail to adequately manage our supply purchasing or
customer credit policies, our working capital and financial condition may be adversely affected.

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Advanced Drainage Systems, Inc.

We may be unable to successfully integrate businesses to realize the anticipated benefits of acquisitions or do so within
the intended timeframe.

The success of any acquisition, including anticipated synergies, benefits and cost savings, will depend, in part, on our
ability to successfully combine and integrate our current operations with the acquisition. If we experience difficulties with
the integration process or other unforeseen costs, the anticipated benefits and cost savings of the acquisition may not be
realized fully or may take longer to realize than expected. The integration planning and implementation process will result
in significant costs and divert management attention and resources. 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.

Our international operations expose us to political, economic and regulatory risks not normally faced by businesses that
operate only in the U.S. As a result of our international operations, we could be adversely affected by violations of the
U.S. Foreign Corrupt Practices Act and similar foreign anti-corruption laws.

Some of our operations are outside the U.S., with manufacturing and distribution facilities in Canada and several Latin
American countries. Our international operations are subject to risks similar to those affecting our operations in the U.S. in
addition to a number of other risks, including: difficulties in enforcing contractual and intellectual property rights;
impositions or increases of withholding and other taxes on remittances and other payments by subsidiaries and affiliates;
exposure to different or changing legal standards, including potential changes in government mandated regulatory product
standards in those countries in which we or our joint ventures operate; fluctuations in currency exchange rates; impositions
or increases of investment and other restrictions by foreign governments; the requirements of a wide variety of foreign
laws; political and economic instability; war; and difficulties in staffing and managing operations, particularly in remote
locations.

The U.S. Foreign Corrupt Practices Act (“FCPA”) and similar foreign anti-corruption laws generally prohibit companies
and their intermediaries from making improper payments or providing anything of value to wrongfully influence foreign
government officials for the purpose of obtaining or retaining business or obtaining an unfair advantage, and generally
require companies to maintain accurate books and records and internal controls, including at foreign controlled
subsidiaries. Our internal policies provide for compliance with all applicable anti-corruption laws for both us and for our
joint venture operations. Our continued operation and expansion outside the U.S., including in developing countries, could
increase the risk of such violations in the future. Despite our training and compliance programs, our internal control
policies and procedures may not always protect us from unauthorized, reckless or criminal acts committed by our
employees, agents or joint venture partners.

Conducting a portion of our operations through joint ventures exposes us to risks and uncertainties, many of which are
outside of our control.

With respect to our existing joint ventures, any differences in views among the joint venture participants may result in
delayed decisions or in failures to agree on major issues. We also cannot control the actions of our joint venture partners,
including any nonperformance, default or bankruptcy of our joint venture partners. As a result, we may be unable to control
the quality of products produced by the joint ventures or achieve consistency of product quality as compared with our other
operations. In addition to net sales and market share, this may have a material negative impact on our brand and how it is
perceived thereafter. Moreover, if our partners also fail to invest in the joint venture in the manner that is anticipated or
otherwise fail to meet their contractual obligations, the joint ventures may be unable to adequately perform and conduct
their respective operations, requiring us to make additional investments or perform additional services to ensure the
adequate performance and delivery of products and/or services to the joint ventures’ customers, which could have a
material adverse effect on our business, financial condition, results of operations and cash flows.

We may not be able to successfully expand into new products.

We may develop new products and processes based on our existing manufacturing, design and engineering capabilities and
services. Our business depends in part on our ability to identify future products and product lines that complement existing
products and product lines and that respond to our customers’ needs. We may not be able to compete effectively unless our
product selection keeps up with trends in the markets in which we compete or trends in new products. In addition, our
ability to integrate new products and product lines into our distribution network could impact our ability to compete.
Furthermore, the success of new products and new product lines will depend on market demand and there is a risk that new
products and new product lines will not deliver expected results, which could negatively impact our future sales and results
of operations.

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Advanced Drainage Systems, Inc.

We continue to invest in our initiatives. If we fail to implement these initiatives as expected, our business, financial
condition, and results of operations could be adversely affected.

Our financial performance and future growth depend on our management’s ability to successfully implement our
initiatives. Our operational initiatives are focused on capacity expansion, automation, safety, order management and
transportation. Automation in our plants will allow for production efficiency and improved safety for plant personnel. Any
failure to successfully implement these initiatives and related strategies could adversely affect our business, financial
condition, and results of operations, including increases in our severance and impairment charges.

Increased fuel and energy prices, and our inability to obtain sufficient quantities of fuel to operate our in-house delivery
fleet.

Prices and availability of petroleum products are subject to political, economic and market factors that are outside our
control. We consume a large amount of energy and petroleum products in our operations, including the manufacturing
process and delivering a significant volume of products to our customers by our in-house fleet. While we utilize a diesel
hedging program associated with our in-house fleet to mitigate against higher fuel prices, our operating profit will be
adversely affected if we are unable to obtain the energy and fuel we require or to fully offset the anticipated impact of
higher energy and fuel prices through increased prices or surcharges to our customers or through other hedging strategies.
If shortages occur in the supply of energy or necessary petroleum products and we are not able to pass along the full impact
of increased energy or petroleum prices to our customers, our business, financial condition, results of operations and cash
flows would be adversely affected.

Internally manufacturing our products at our own facilities subjects our business to risks associated with
manufacturing processes.

We internally manufacture our own products at our facilities with substantial fixed costs. While we maintain insurance
covering our manufacturing and production facilities and have significant flexibility to manufacture and ship our own
products from various facilities, a catastrophic loss of the use of certain of our facilities due to accident, fire, explosion,
labor issues, weather conditions, pandemics, other natural disaster or otherwise, whether short or long-term, could have a
material adverse effect on our business, financial condition, results of operations and cash flows. Our business interruption
insurance may not be sufficient to offset the lost revenues or increased costs that we may experience during a disruption of
our operations.

Unexpected failures of our equipment and machinery may result in production delays, revenue loss and significant repair
costs, injuries to our employees, and customer claims. Any interruption in production capability may limit our ability to
supply enough products to customers and may require us to make large capital expenditures to remedy the situation, which
could have a negative impact on our profitability and cash flows. Increasing manufacturing capacity requires successful
execution of capital projects, including adding, upgrading and replacing equipment.

The nature of our business exposes us to construction defect and product liability claims as well as other legal
proceedings.

We are exposed to construction defect and product liability claims relating to our various products if our products do not
meet customer expectations. Such liabilities may arise out of the quality of raw materials we purchase from third-party
suppliers. We also operate a large fleet of trucks and other vehicles and therefore face the risk of traffic accidents.

While we currently maintain insurance coverage to address a portion of these types of liabilities, we cannot make
assurances that we will be able to obtain such insurance on acceptable terms in the future, if at all, or that any such
insurance will provide adequate coverage against potential claims. Further, while we intend to seek indemnification against
potential liability for products liability claims from relevant parties, we cannot guarantee that we will be able to recover
under any such indemnification agreements. Product liability claims can be expensive to defend and can divert the attention
of management and other personnel for significant time periods, regardless of the ultimate outcome. In addition, even if we
are successful in defending any claim relating to the products we distribute, claims of this nature could negatively impact
customer confidence in us and our products.

From time to time, we are also involved in government inquiries and investigations, as well as consumer, employment, tort
proceedings and other litigation. We cannot predict with certainty the outcomes of these legal proceedings and other
contingencies, including potential environmental remediation and other proceedings commenced by government
authorities. The outcome of some of these legal proceedings and other contingencies could require us to take actions which
would adversely affect our operations or could require us to pay substantial amounts of money. Additionally, defending

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Advanced Drainage Systems, Inc.

against these lawsuits and proceedings may involve significant expense and diversion of management’s attention and
resources from other matters.

Our operations are affected by various laws and regulations in the markets in which we operate, including government
mandated regulatory product standards, and our failure to obtain or maintain approvals by municipalities, state
departments of transportation, engineers and developers may affect our results of operations.

While we are not engaged in a regulated industry, we are subject to various laws applicable to businesses generally,
including laws affecting land usage, zoning, the environment, health and safety, transportation, labor and employment
practices (including pensions), competition, immigration and other matters. Additionally, approvals by municipalities, the
U.S. and state departments of transportation, engineers and developers may affect the products our customers are allowed
to use, and, consequently, failure to obtain or maintain such approvals may affect the salability of our products. Building
codes may also affect the products our customers use, and, consequently, changes in building codes may also affect the
salability of our products. Changes in applicable regulations governing the sale of some of our products, including changes
in government mandated regulatory product standards in countries in which we or our joint ventures operate, could
increase our costs. In addition, changes to applicable tax laws and regulations could increase our costs of doing business.
We cannot provide assurance that we will not incur material costs or liabilities in connection with regulatory requirements.

We deliver products to many of our customers through our own fleet of vehicles. The U.S. DOT regulates our operations in
domestic interstate commerce. We are subject to safety requirements governing interstate operations prescribed by the U.S.
DOT. Vehicle dimensions and driver hours of service also remain subject to both federal and state regulation. More
restrictive limitations on vehicle weight and size, trailer length and configuration, or driver hours of service could increase
our costs, which, if we are unable to pass these cost increases on to our customers, would reduce our gross profit and net
income (loss) and increase our selling, general and administrative expenses.

We cannot predict whether future developments or changes in law, regulations or government mandated product standards
concerning our business units or products will affect our business, financial condition and results of operations in a
negative manner. Similarly, we cannot assess whether our business units will be successful in meeting future demands of
regulatory agencies in a manner which will not materially adversely affect our business, financial condition, results of
operations and cash flows.

Interruptions in the proper functioning of information technology systems could disrupt operations and cause
unanticipated increases in costs, decreases in revenues, or both. The implementation of our technology initiatives could
disrupt our operations in the near term, and our technology initiatives might not provide the anticipated benefits or
might fail.

Because we use our information technology (“IT”) systems to, among other things, manage inventories and accounts
receivable, make purchasing decisions and monitor our results of operations, the proper functioning of our IT systems is
important to the successful operation of our business. Although our IT systems are protected through physical and software
safeguards and remote processing capabilities exist, IT systems are still vulnerable to natural disasters, power losses,
unauthorized access, telecommunication failures and other problems. If critical IT systems fail, or are otherwise
unavailable, our ability to process orders, track credit risk, identify business opportunities, maintain proper levels of
inventories, collect accounts receivable and pay expenses and otherwise manage our business units would be adversely
affected.

Management uses IT systems to support decision making and to monitor business performance. We may fail to generate
accurate financial and operational reports essential for making decisions at various levels of management. In addition, if we
do not maintain adequate controls such as reconciliations, segregation of duties and verification to prevent errors or
incomplete information, our ability to operate our business could be limited.

We have made, and will continue to make, significant investments in technology. Our technology initiatives are designed to
provide our customers a better order management and fulfillment experience, streamline our manufacturing operations and
improve the quality of our internal control environment. The cost and potential problems and interruptions associated with
the implementation of our technology initiatives could disrupt or reduce the efficiency of our operations in the near term. In
addition, our new or upgraded technology might not provide the anticipated benefits, take longer than expected to realize
the anticipated benefits or might fail altogether. The occurrence of such issues could have a material adverse effect on our
business financial condition and results of operations.

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Advanced Drainage Systems, Inc.

Cybersecurity attacks may threaten our confidential information, disrupt operations and result in harm to our
reputation and adversely impact our business and financial performance.

In the conduct of our business, we collect, use, transmit and store data on information systems, which are vulnerable to
disruption and an increasing threat of continually evolving cybersecurity risks. Cybersecurity attacks across industries are
increasing in sophistication and frequency and may range from uncoordinated individual attempts to targeted measures.
These attacks include but are not limited to, malicious software or viruses, including “ransomware” attempts to gain
unauthorized access to, or otherwise disrupt, our information systems, attempts to gain unauthorized access to business,
proprietary or other confidential information, and other electronic security breaches that could lead to disruptions in critical
systems, unauthorized release of confidential or otherwise protected information and corruption of data. Cybersecurity
failures may be caused by employee error, malfeasance, other corporate or governmental actors, system errors or
vulnerabilities, including vulnerabilities of our vendors, suppliers, and their products.

While we have been subject to cybersecurity attacks in the past, that (based on information known to date) did not have a
material impact on our financial condition or results of operations, we may experience such attacks in the future, potentially
with more frequency or sophistication which may have a material impact on our financial condition or results of operations.
The occurrence of any of these events could adversely affect our reputation and could result in litigation, regulatory action,
financial loss, project delay claims and increased costs and operational consequences of implementing further data
protection systems.

Failures of our IT systems as a result of cybersecurity attacks or other disruptions could result in a breach of critical
operational or financial controls and lead to a disruption of our operations, commercial activities or financial processes.
Cybersecurity attacks or other disruptions impacting significant customers and/or suppliers could also lead to a disruption
of our operations. Despite our attempts to safeguard our systems and mitigate potential risks, there is no assurance that such
actions will be sufficient to prevent cyberattacks or security breaches that manipulate or improperly use our systems or
networks, compromise confidential or otherwise protected information, destroy or corrupt data, or otherwise disrupt our
operations. The occurrence of such events could have a material adverse effect on our business financial condition and
results of operations.

All of these risks are also applicable where we rely on outside vendors to provide services. We are dependent on third-party
vendors to operate secure and reliable systems which may include data transfers over the internet. Any events which deny
us use of vital operating or information systems may seriously disrupt our normal business operations. Additionally, our
key partners, distributors or suppliers could experience a compromise of their information security due to a cybersecurity
attack, which may have an impact on our business and financial performance.

Our success depends upon our ability to control labor costs and to attract, train and retain highly qualified employees
and key personnel.

To be successful, we must attract, train and retain a large number of highly qualified employees while controlling related
labor costs. Our ability to control labor costs is subject to numerous external factors, including prevailing wage rates and
health and other insurance costs. There is no assurance that we will be able to attract or retain highly qualified employees in
the future, including, those employed by companies we acquire. None of our domestic employees are currently covered by
collective bargaining or other similar labor agreements. However, if a number of our employees were to unionize, the
effect on us may be negative.

In addition, our business results of operations depend largely upon our chief executive officer and senior management team
as well as our plant managers and sales personnel, including those of companies acquired, and their experience, knowledge
of local market dynamics and specifications and long-standing customer relationships. Our inability to retain or hire
qualified plant managers or sales personnel at economically reasonable compensation levels would restrict our ability to
grow our business, limit our ability to continue to successfully operate our business and result in lower operating results
and profitability.

If we are unable to protect our intellectual property rights, or we infringe on the intellectual property rights of others,
our ability to compete could be negatively impacted.

Our ability to compete effectively depends, in part, upon our ability to protect and preserve proprietary aspects of our
intellectual property through a combination of patent, trademark, copyright and trade secret laws, as well as licensing
agreements and third-party nondisclosure and assignment agreements. Because of the differences in foreign trademark,
patent and other laws concerning proprietary rights, our intellectual property rights may not receive the same degree of
protection in foreign countries as they would in the U.S. Our failure to obtain or maintain adequate protection of our

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intellectual property rights for any reason could have a material adverse effect on our business, results of operations and
financial condition.

We could incur significant costs in complying with environmental, health and safety laws or permits or as a result of
satisfying any liability or obligation imposed under such laws or permits.

Our operations are subject to various federal, state, local and foreign environmental, health and safety laws and regulations.
Among other things, these laws regulate the emission or discharge of materials into the environment, govern the use,
storage, treatment, disposal and management of hazardous substances and wastes, protect the health and safety of our
employees and the end users of our products, regulate the materials used in and the recycling of products and impose
liability for the costs of investigating and remediating, and damages resulting from, present and past releases of hazardous
substances. Violations of these laws and regulations, failure to obtain or maintain required environmental permits or non-
compliance with any conditions contained in any environmental permit can result in substantial fines or penalties,
injunctive relief, requirements to install pollution or other controls or equipment, civil and criminal sanctions, permit
revocations and/or facility shutdowns. We could be held liable for the costs to address contamination of any real property
we have ever owned, leased, operated or used, including as a disposal site. We could also incur fines, penalties, sanctions
or be subject to third-party claims for property damage, personal injury or nuisance or otherwise as a result of violations of
or liabilities under environmental laws in connection with releases of hazardous or other materials.

In addition, changes in, or new interpretations of, existing laws, regulations or enforcement policies, the discovery of
previously unknown contamination, or the imposition of other environmental liabilities or obligations in the future,
including additional investigation or other obligations with respect to any potential health hazards of our products or
business activities or the imposition of new permit requirements, may lead to additional compliance or other costs that
could have material adverse effect on our business, financial condition, results of operations and cash flows.

Risks Relating to Our Indebtedness

Our level of indebtedness could adversely affect our business, financial conditions or results of operations and prevent
us from fulfilling our obligations under the agreements governing the terms of our indebtedness.

Our indebtedness could have risks. For example, it could:

• make it more difficult for us to satisfy our obligations with respect to the Company’s existing 5.0% senior notes
due 2027 (the “Senior Notes”) and our Senior Secured Credit Facility;
• increase our vulnerability to and compromise our flexibility to plan for, or react to, general adverse economic,
industry or competitive conditions, including interest rate fluctuations, because a portion of our borrowings will be
at variable rates of interest;
• cause us to be unable to meet the financial covenants contained in our debt agreements, or to generate cash
sufficient to make required debt payments, which circumstances would have the potential of accelerating the
maturity of some or all of our outstanding indebtedness;
• require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness,
thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, joint
ventures and investments and other general corporate purposes, that could improve our competitive position,
results of operations or share price;
• require us to sell debt or equity securities or to sell some of our core assets, possibly on unfavorable terms, to meet
payment obligations;
• place us at a competitive disadvantage compared to our competitors that do not have the same level of
indebtedness as we do and competitors that may be in a more favorable position to access additional capital
resources;
• limit our ability to execute business development and acquisition activities to support our strategies;
• limit our ability to obtain additional indebtedness or equity due to applicable financial and restrictive covenants in
our debt agreements; and
• limit our ability to refinance our indebtedness on more favorable terms.
We expect to pay principal and interest on current and future debt from cash provided by operating activities. Therefore,
our ability to meet these payment obligations will depend on future financial performance and cash availability. If our cash
flow and capital resources are insufficient to fund our debt obligations, we may be forced to reduce or delay expansion
plans and capital expenditures, limit payment of dividends, sell material assets or operations, obtain additional capital or
restructure our debt.

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Advanced Drainage Systems, Inc.

Risks Relating to Our Common Stock

Future sales of shares by existing stockholders, including shares of our common stock held in our newly formed KSOP,
could cause our stock price to decline.

Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur,
could cause the market price of our common stock to decline. On April 11, 2022, our employee stock ownership plan
(“ESOP”), which was merged into our existing 401(k) retirement plan effective April 1, 2022 (the “KSOP”), completed the
conversion of all 15.6 million outstanding shares of our preferred stock held by the ESOP, and then by the KSOP, on
March 31, 2022, into 12.0 million shares of our common stock, in accordance with the conversion terms of our preferred
stock. All of these shares will be eligible for future sale, either by the KSOP trustee or by KSOP participants subject to the
limitation of Rule 144.

Based on shares outstanding as of May 10, 2022, we have 84.4 million outstanding shares of common stock, including
0.2 million outstanding shares of our restricted stock, a significant portion of which are freely tradeable without restriction
under the Securities Act of 1933, as amended, (“Securities Act”) unless held by “affiliates,” as that term is defined in Rule
144 under the Securities Act. As of March 31, 2022, there were stock options outstanding to purchase a total of
approximately 1.2 million shares of our common stock. In addition, approximately 2.6 million shares of common stock are
available for grant under our 2017 Omnibus Plan.

Certain of our significant stockholders may distribute shares that they hold to their investors who themselves may then sell
into the public market. Such sales may not be subject to the volume, manner of sale, holding period and other limitations of
Rule 144 of the Securities Act (“Rule 144”). As resale restrictions end, the market price of our common stock could decline
if the holders of those shares sell them or are perceived by the market as intending to sell them.

In the future, we may issue additional shares of common stock or other equity or debt securities convertible into common
stock in connection with a financing, acquisition, litigation settlement or employee arrangement or otherwise. Any of these
issuances could result in substantial dilution to our existing stockholders and could cause the trading price of our common
stock to decline.

Our directors, officers and principal stockholders have significant voting power and may take actions that may not be in
the best interests of our other stockholders. The trustee of our KSOP has certain limited powers to vote a large block of
shares on matters presented to stockholders for approval.

As of May 10, 2022, our directors, officers and principal stockholders and their affiliates collectively own approximately
14% of our outstanding shares of common stock. Additionally, our newly formed KSOP holds shares of common stock that
KSOP participants with ESOP accounts are entitled to vote on a one-for-one basis on any matter requiring the vote or
consent of our stockholders. Thus, the collective voting power of our directors, officers and principal stockholders and their
affiliates as of May 10, 2022 is approximately 29%, inclusive of the outstanding shares of common stock held by the
KSOP. As a result, these stockholders, if they act together, may be able to control our management and affairs and most
matters requiring stockholder approval, including the election of directors and approval of significant corporate
transactions. This concentration of ownership may have the effect of delaying or preventing a change of control and might
adversely affect the market price of our common stock. This concentration of ownership may not be in the best interests of
our other stockholders.

In general, the KSOP trustee votes the shares of common stock held by the KSOP as directed by the KSOP’s participants
with ESOP accounts. Consequently, the KSOP trustee has the ability to vote a significant block of shares on certain matters
presented to stockholders for approval. Each participant with an ESOP account in the KSOP may direct the KSOP trustee
on how to vote the shares of common stock allocated to the participant’s ESOP accounts in the KSOP; and the KSOP
trustee may vote any shares of common stock for which no participant instructions were received in the same proportion as
the allocated stock for which participants’ voting instructions have been received is voted.

Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in
control of us and may affect the trading price of our common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws include a number of provisions
that may discourage, delay or prevent a change in our management or control over us that stockholders may consider
favorable. For example, our amended and restated certificate of incorporation and amended and restated bylaws, each as
further amended authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to

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thwart a takeover attempt; maintain a classified board of directors, for the next three years, until such time that our
declassified board structure is fully implemented at the 2023 annual meeting of stockholders; provide that vacancies on our
board of directors, including newly-created directorships, may be filled only by a majority vote of directors then in office;
prohibit stockholders from calling special meetings of stockholders; prohibit stockholder action by written consent, thereby
requiring all actions to be taken at a meeting of the stockholders; do not give the holders of our common stock cumulative
voting rights with respect to the election of directors, which means that the holders of a majority of our outstanding shares
of common stock can elect all directors standing for election; establish advance notice requirements for nominations for
election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings;
require a super-majority stockholders vote of 75% to approve any reorganization, recapitalization, share exchange, share
reclassification, consolidation, merger, conversion or sale of all or substantially all assets to which we are a party that is not
approved by the affirmative vote of at least 75% of the members of our board of directors; and require the approval of
holders of a majority of the outstanding shares of our voting common stock to amend the bylaws and at least 75% of the
outstanding shares of our voting common stock to amend certain provisions of the certificate of incorporation.

Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware General
Corporation Law that has the effect of delaying or deterring a change in control could limit the opportunity for our
stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors
are willing to pay for our common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws may also make it difficult for
stockholders to replace or remove our management. These provisions may facilitate management entrenchment that may
delay, deter, render more difficult or prevent a change in our control, which may not be in the best interests of our
stockholders.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the
exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a claim of breach of a
fiduciary duty owed to us or our stockholders by our directors, officers, employees or agents; any action asserting a claim
against us arising under the Delaware General Corporation Law, our amended and restated certificate of incorporation or
our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.
Any person or entity purchasing or otherwise acquiring any interest in shares of our common stock shall be deemed to have
notice of and to have consented to the provisions of our amended and restated certificate of incorporation described above.
The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable
for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us or our
directors, officers, employees or agents. If a court were to find the choice of forum provision contained in our amended and
restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs
associated with resolving such action in other jurisdictions, which could adversely affect our business and financial
condition.

General Risk Factors

As a publicly-traded manufacturing company, we are subject to a variety of risks in addition to the risks described
above, each of which could adversely affect our financial position, results of operations or cash flows.

These risks include but are not limited to:

• taxation by multiple jurisdictions and the impact of such taxation on the effective tax rate and the amount of taxes
paid;
• material liabilities under our self-insured programs for workers' compensation, automobile and product/general
liability coverage as well as health coverage to our employees;
• fluctuations in our effective tax rate, including from the Tax Cuts and Jobs Act of 2017, the Coronavirus Aid,
Relief, and Economic Security (“CARES”) Act and any future tax legislation;
• new or modified legislation related to health care;
• the review of potential weaknesses or deficiencies in the Company's disclosure controls and procedures, and
discovering further weaknesses of which we are not currently aware or which have not been detected;
• we cannot assure our stockholders that an active market for shares of our common stock can be sustained and the
market price of our common stock may be volatile and could decline in the future; and
• failure to meet the expectations of investors, including as a result of factors beyond our control.

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Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Property

We have a network of 70 manufacturing plant locations and 38 distribution centers, summarized in the following table:

Manufacturing Plants Distribution Centers Total

United States 57 24 81
Canada 5 4 9
(1)
Mexico 4 4 8
(1)(2)
South America 4 5 9
(3)
Other — 1 1
Total 70 38 108

(1) Manufacturing plants and distribution centers in Mexico and South America are owned or leased by our
joint ventures.
(2) Manufacturing plants and distribution centers owned or leased by our South America joint venture are
not consolidated.
(3) The other facility is located in the Netherlands.

We currently own approximately 36,000 square feet and lease approximately 29,000 square feet of office space in Hilliard,
Ohio for our corporate headquarters and lease an office space in Old Saybrook, Connecticut for our Infiltrator headquarters.

Our network of 70 manufacturing plants consist of 47 that are owned and 23 that are leased. We generally prefer to own
our manufacturing plant locations, with a typical pipe manufacturing facility consisting of approximately 40,000 square
feet and 15 to 20 acres of land for storage of pipe and related products. Our network of 38 distribution centers consisted of
2 owned and 36 leased locations. We believe that our properties have been adequately maintained and are generally in good
condition. The extent to which we use our properties varies by property and from time to time, but we believe the capacity
of our facilities is adequate for the level of production and distribution activities necessary in our business as presently
conducted. Each distribution center carries single wall and dual wall pipe and fittings and Allied Products per needs of the
local market.

In-House Fleet

As of March 31, 2022, our in-house fleet consists of approximately 700 tractors and approximately 1,300 trailers that are
specially designed to haul our lightweight pipe and fittings products.

Item 3. Legal Proceedings

The Company is involved from time to time in various legal proceedings that arise in the ordinary course of our 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 our financial
position or our results of operations. The Company records a liability when a loss is considered probable, and the amount
can be reasonably estimated.

Item 4. Mine Safety Disclosures

Not applicable.

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Advanced Drainage Systems, Inc.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities

Market Information for Common Stock

Our common stock is listed and traded on the NYSE under the symbol “WMS”.

During each quarter of fiscal 2022, the Board of Directors approved a quarterly cash dividend of $0.11 per share to all
common stockholders. During each quarter of fiscal 2021, the Board of Directors approved a quarterly cash dividend of
$0.09 per share to all common stockholders. During the first quarter of fiscal 2020, the Board of Directors approved a
special dividend of $1.00 per share payable on June 14, 2019 to stockholder of record at the close of business on June 3,
2019. In addition, during each quarter of fiscal 2020, the Board of Directors approved a quarterly cash dividend of $0.09
per share to all common stockholders.

During the first quarter of fiscal 2023, the Company declared a quarterly cash dividend of $0.12 per share of common
stock. The dividend is payable on June 15, 2022 to stockholders of record at the close of business on June 1, 2022.

Holders of Record

As of May 10, 2022, we had 708 holders of record of our common stock. The number of holders of record is based upon
the actual number of holders registered as of such date and does not include holders of shares in “street name” or persons,
partnerships, associates, corporations or other entities in security position listings maintained by depositories.

Stock Performance Graph

The following graph presents a comparison from March 31, 2017 through March 31, 2022 of the cumulative return of our
common stock, the Standard and Poor's Index (“S&P 500”) and the Russell 2000 Index (“Russell 2000”). The graph
assumes investment of $100 on March 31, 2017 in our common stock and in each of the two indices and the reinvestment
of dividends.

Recent Sales of Unregistered Securities

Since the completion of our IPO, we have not sold any securities without registration under the Securities Act of 1933, as
amended.

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Advanced Drainage Systems, Inc.

Issuer Purchases of Equity Securities

Our Board of Directors authorized the repurchase of up to $300 million of our common stock. During the fiscal 2022, we
repurchased 2.6 million shares of common stock at a cost of $292 million and utilized all of the common stock repurchase
authorization. We did not repurchase any shares of common stock during the three months ended March 31, 2022.

In February 2022, we announced that our Board approved a $1.0 billion stock repurchase program (the “Repurchase
Program”) of ADS common stock in accordance with applicable securities laws. The Repurchase Program replaces the
previously established share repurchase program, which has no remaining available capacity. The Repurchase Program
does not obligate us to acquire any particular amount of common stock and may be suspended or terminated at any time at
our discretion.

Equity Compensation Plan Information

For equity compensation plan information, refer to “Part III, Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters,” of this Annual Report on Form 10-K.

Item 6. Reserved

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Advanced Drainage Systems, Inc.

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes forward-looking statements. Some of the forward-looking statements can be
identified by the use of terms such as “believes,” “expects,” “may,” “will,” “should,” “could,” “seeks,” “intends,” “plans,”
“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 Annual Report on Form 10-K and include statements regarding our goals, 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 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 Annual Report on Form 10-K. 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 Annual Report on Form 10-K, 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 Annual
Report on Form 10-K (including under the heading “Item 1A. Risk Factors”) 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, among other things:

• fluctuations in the price and availability of resins and other raw materials and our ability to pass any increased
costs of raw materials on to our customers in a timely manner;
• the risks related to the COVID-19 pandemic or other pandemics in the future;
• disruption or volatility in general business and economic conditions in the markets in which we operate;
• cyclicality and seasonality of the non-residential and residential construction markets and infrastructure spending;
• the risks of increasing competition in our existing and future markets;
• uncertainties surrounding the integration and realization of anticipated benefits of acquisitions;
• the effect of any claims, litigation, investigations or proceedings, including those described under “Item 3. Legal
Proceedings” of this Annual Report;
• the effect of weather or seasonality;
• the loss of any of our significant customers;
• the risks of doing business internationally;
• the risks of conducting a portion of our operations through joint ventures;
• our ability to expand into new geographic or product markets;
• the risk associated with manufacturing processes;
• the effect of global climate change;
• cybersecurity risks;
• our ability to manage our supply purchasing and customer credit policies;
• our ability to control labor costs and to attract, train and retain highly qualified employees and key personnel;
• our ability to protect our intellectual property rights;
• changes in laws and regulations, including environmental laws and regulations;
• the risks associated with our current levels of indebtedness, including borrowings under our existing credit
agreement and outstanding indebtedness under our existing senior notes; and
• other risks and uncertainties, including those listed under “Item 1A. Risk Factors.”

Please read this Annual Report on Form 10-K completely and with the understanding that actual future results may be
materially different from expectations. All forward-looking statements made in this Annual Report on Form 10-K are
qualified by these cautionary statements. All forward-looking statements are made only as of the date of this Annual Report
on Form 10-K, 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.

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Advanced Drainage Systems, Inc.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, references to “year” pertain to our fiscal
year. For example, “2022” refers to fiscal 2022, which is the period from April 1, 2021 to March 31, 2022.

The following discussion and analysis of our financial condition and results of our operations should be read in
conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form
10-K. This discussion contains forward-looking statements that are based on the beliefs of our management, as well as
assumptions made by, and information currently available to, our management. Our actual results could differ materially
from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those
identified below, and those discussed in the sections titled “Item 1A. Risk Factors” and “Cautionary Statement About
Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K. Please read the following
discussion together with the sections titled “Item 1A. Risk Factors” and our consolidated financial statements, including
the related notes, included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

Overview

We are the leading manufacturer of 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. With
the acquisition of Infiltrator in the second quarter of fiscal 2020, we are now a leading provider of plastic leachfield
chambers, septic tanks and accessories for use primarily in residential applications.

Impact of COVID-19

In March 2020, the World Health Organization categorized the novel coronavirus (“COVID-19”) as a pandemic, and it
continues to spread throughout the United States and globally. The COVID-19 pandemic has resulted, and is likely to
continue to result, in significant economic disruptions and may have an adverse effect on our business. Significant
uncertainty exists concerning the magnitude of the impact and duration of the COVID-19 pandemic.

Key Factors Affecting Our Results of Operations

Product Demand - There are numerous factors that influence demand for our products. Our businesses are cyclical in
nature and sensitive to general economic conditions, primarily in the United States, Canada, Mexico and South America.
The non-residential, residential, agricultural and infrastructure markets we serve are affected by the availability of credit,
lending practices, interest rates and unemployment rates. Demand for new homes, farm income, commercial development
and highway infrastructure spending have a direct impact on our financial condition and results of operations. Accordingly,
the following factors may have a direct impact on our business in the markets in which our products are sold:

• the strength of the economy;

• the amount and type of non-residential and residential construction;
• funding for infrastructure spending;
• farm income and agricultural land values;
• inventory of improved housing lots;
• changes in raw material prices;
• the availability and cost of credit;
• non-residential occupancy rates;
• commodity prices; and
• demographic factors such as population growth and household formation.

Product Pricing - The price of our products is impacted by competitive pricing dynamics in our industry as well as by raw
material input costs. Our industry is highly competitive and the sales prices for our products may vary based on the sales
policies of our competitors. Raw material costs represent a significant portion of the cost of goods sold for our products.
We aim to increase our product selling prices in order to cover raw material price increases, but the inability to do so could

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Advanced Drainage Systems, Inc.

impact our profitability. Movements in raw material, logistics or other overhead costs and resulting changes in the selling
prices may also impact changes in period-to-period comparisons of net sales.

Material Conversion - Our HDPE and PP pipe, plastic leachfield chambers, septic tanks and related water management
product lines compete with other manufacturers of corrugated polyethylene pipe as well as manufacturers of alternative
products made with traditional materials, such as concrete, steel and PVC. Our net sales are driven by market trends,
including the continued increase in adoption of thermoplastic corrugated pipe products as a replacement for traditional
materials. Thermoplastic corrugated pipe is generally lighter, more durable, more cost effective and easier to install than
comparable products made from traditional materials. We believe customers will continue to acknowledge the superior
attributes and compelling value proposition of our thermoplastic products and expanded regulatory approvals allow for
their use in new markets and geographies. In addition, we believe that PP pipe products will also help accelerate conversion
given the additional applications for which our PP pipe products can be used.

We believe the adoption of HDPE and PP pipe outside of the United States is still in its early stages and represents a
significant opportunity for us to continue to increase the conversion to our products from traditional products in these
markets, including Canada, Mexico and South America where we operate.

Growth in Allied Products & Other - Our Allied Products & Other include storm and septic chambers, PVC drainage
structures, fittings, stormwater filters and water separators. These products complement our pipe product lines and allow us
to offer a comprehensive water management solution to our customers and drive organic growth. Our leading market
position in pipe products allows us to cross-sell Allied Products & Other effectively. Our comprehensive offering of Allied
Products & Other also helps us increase pipe sales in certain markets. Our Allied Products & Other are less sensitive to
increases in resin prices since resin prices represent a smaller percentage of the cost for Allied Products & Other.

Our leading position in the pipe market has allowed us to increase organic growth of our Allied Products & Other. We also
expect to expand our Allied Product offerings through acquisitions.

Raw Material Costs - Our raw material cost and product selling prices fluctuate with changes in the price of resins utilized
in production. We actively manage our resin purchases and pass fluctuations in the cost of resin through to our customers,
where possible, in order to maintain our profitability. Fluctuations in the price of crude oil and natural gas prices may
impact the cost of resin. In addition, changes in and disruptions to existing ethylene or polyethylene capacities could also
significantly increase resin prices, often within a short period of time, even if crude oil and natural gas prices remain low.
Our ability to pass through raw material price increases to our customers may, in some cases, lag the increase in our costs
of goods sold. Sharp rises in raw material prices over a short period of time have historically occurred with a significant
supply disruption (hurricanes or fires at petrochemical facilities), which may increase prices to levels that cannot be fully
passed through to customers due to pricing of competing products made from different raw materials or the anticipated
length of time the raw material pricing will stay elevated. For more information regarding risks relating to our raw material
costs, see “Item 1A. Risk Factors — Risks Relating to Our Business.”

We currently purchase in excess of 1.3 billion pounds of virgin and recycled resin annually from approximately 500
suppliers in North America. As a high-volume buyer of resin, we are able to achieve economies of scale to negotiate
favorable terms and pricing. Our purchasing strategies differ based on the material (virgin resin versus recycled material)
ordered for delivery to our production locations. The price movements of the different materials also vary, resulting in the
need to use a number of strategies to reduce volatility.

In order to reduce the volatility of raw material costs in the future, our raw material strategies for managing our costs
include the following:
• increasing the use of less price-volatile recycled HDPE resin in our pipe products in place of virgin resin while
meeting or exceeding industry standards;
• internally processing an increasing percentage of our recycled HDPE resin in order to closely monitor quality and
minimize costs;
• managing a resin price risk program that may entail both physical fixed price and volume contracts; and
• maintaining supply agreements with our major resin suppliers that provide multi-year terms and volumes that are
in excess of our projected consumption.

We also consume a large amount of energy and other petroleum products in our operations, including the electricity we use
in our manufacturing process as well as the diesel fuel consumed in delivering a significant volume of products to our

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Advanced Drainage Systems, Inc.

customers through our in-house fleet. As a result, our operating profit also depends upon our ability to manage the cost of
the energy and fuel we require, as well as our ability to pass through increased prices or surcharges to our customers.

Seasonality - Our operating results are impacted by seasonality. Historically, sales of our products have been higher in the
first and second quarters of each fiscal year due to favorable weather and longer daylight conditions accelerating
construction project activity during these periods while fourth quarter results are impacted by the timing of spring in the
northern United States and Canada. Seasonal variations in operating results may also be significantly impacted by
inclement weather conditions, such as cold or wet weather, which can delay projects, resulting in decreased net sales for
one or more quarters, but we believe that these delayed projects generally result in increased net sales during subsequent
quarters.

In the non-residential, residential and infrastructure markets in the northern United States and Canada, the construction
season typically begins to gain momentum in late March and lasts through November, before winter sets in, significantly
slowing the construction markets. In the southern and western United States, Mexico, Central America and South America,
the construction markets are less seasonal. The agricultural drainage market is concentrated in the early spring just prior to
planting and in the fall just after crops are harvested prior to freezing of the ground in winter.

Currency Exchange Rates - Although we sell and manufacture our products in many countries, our sales and production
costs are primarily denominated in U.S. dollars. We have wholly-owned facilities in Canada, the Netherlands and joint
venture facilities in Mexico, Chile, Brazil, Argentina, Colombia and Peru. The functional currencies in the areas in which
we have wholly-owned facilities and joint venture facilities other than the U.S. dollar are the Canadian dollar, Euro,
Mexican peso, Chilean peso, Brazilian real and Colombian peso. From time to time, we use derivatives to reduce our
exposure to currency fluctuations.

Executive Summary of Our Fiscal Year 2022 Results

Fiscal Year 2022 Results

• Net sales increased 39.7% to $2.8 billion

• Net income increased to $275.0 million, compared to net income of $226.1 million in the prior year
• Adjusted EBITDA increased 19.2% to $676.0 million
• Cash provided by operating activities decreased 39.2% to $274.9 million
• Free cash flow decreased 66.3% to $125.8 million

Net sales increased $786.5 million, or 39.7%, to $2,769.3 million, as compared to $1,982.8 million in the prior year.
Domestic pipe sales increased $496.0 million, or 46.8%, to $1,555.2 million. Domestic allied products & other sales
increased $126.9 million, or 28.7%, to $569.4 million. Infiltrator sales increased $154.1 million, or 38.7%, to $551.9
million. These increases were driven by strong sales growth in both the U.S. construction and agriculture end markets.
International sales increased $59.9 million, or 36.3%, to $224.7 million, driven by double-digit sales growth in the
Canadian, Mexican and Exports businesses.

Gross profit increased $110.3 million, or 16.0%, to $800.4 million as compared to $690.1 million in the prior year. The
increase is primarily due an increase in sales volume and favorable pricing on pipe, onsite septic and allied products. These
increases were partially offset by inflationary cost pressure on materials, transportation and labor, as well as an increase in
the use of third-party logistics services. Labor shortages and absenteeism related to COVID-19 remain a challenge in both
manufacturing and transportation operations. In addition, the Company recorded $19.2 million of non-cash, stock-based
compensation expense in Cost of goods sold - ESOP acceleration and special dividend compensation expense.

Adjusted EBITDA, a non-GAAP financial measure, increased $109.1 million, or 19.2%, to $676.0 million, as compared to
$567.0 million in the prior year. The increase is primarily due to the factors mentioned above. As a percentage of net sales,
Adjusted EBITDA was 24.4% as compared to 28.6% in the prior year.

Description of our Segments

We operate our business in three distinct reportable segments: “Pipe”, “International” and “Infiltrator.” “Allied Products &
Other” represents our Allied Products and all other business segments.

We generate a greater proportion of our net sales and gross profit in our Pipe segment, which consists of Pipe product sales
in all regions of the United States. We expect the percentage of total net sales and gross profit derived from our other

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Advanced Drainage Systems, Inc.

segments to continue to increase in future periods as we continue to expand non-Pipe product and our international
presence. See “Note 18. Business Segment Information,” to our audited consolidated financial statements included in “Item
8. Financial Statements and Supplementary Data” of this Form 10-K.

Pipe – Our Pipe segment manufactures and markets high performance thermoplastic corrugated pipe throughout the United
States. We maintain and serve these markets through product distribution relationships with many of the largest national
and independent waterworks distributors, buying groups and co-ops, major national retailers as well as an extensive
network of hundreds of small to medium-sized distributors across the United States.

Infiltrator – Infiltrator is a leading national provider of plastic leachfield chambers and systems, septic tanks and
accessories, primarily for use in residential applications. Infiltrator products are used in onsite septic wastewater treatment
systems in the United States and Canada.

International – Our International segment manufactures and markets products in regions outside of the United States, with
a strategy focused on our owned facilities in Canada and those markets serviced through our joint ventures in Mexico and
South America. Pipe manufactured in these countries is primarily sold into the same region. Our joint venture strategy has
provided us with local and regional access to new markets. The unconsolidated sales of the South American Joint Venture
were $61.6 million, $45.6 million, and $52.5 million, in fiscal 2022, 2021, and 2020, respectively.

Allied Products & Other – Our other operating segments manufacture a range of Allied Products & Other that are
complementary to our Pipe products. Our Allied Products & Other offer adjacent technologies to our core Pipe offering,
presenting a complete drainage solution for our clients and customers.

Results of Operations

Fiscal Year Ended March 31, 2022 Compared with Fiscal Year Ended March 31, 2021

The following table summarizes our operating results as a percentage of net sales that have been derived from our
Consolidated Financial Statements for the fiscal years ended March 31, 2022 and 2021. We believe this presentation is
useful to investors in comparing historical results.

Consolidated Statements of Operations data: 2022 2021

(Amounts in thousands)
Net sales $ 2,769,315 100.0 % $1,982,780 100.0 %
Cost of goods sold 1,949,750 70.4 1,292,698 65.2
Cost of goods sold - ESOP acceleration and special dividend
compensation 19,181 0.7 — —
Gross profit 800,384 28.9 690,082 34.8
Selling, general and administrative expenses 309,840 11.2 267,574 13.5
Selling, general and administrative - ESOP acceleration and special
dividend compensation 11,254 0.4 — —
Loss on disposal of assets and costs from exit and disposal activities 3,398 0.1 4,275 0.2
Intangible amortization 63,974 2.3 73,708 3.7
Income from operations 411,918 14.9 344,525 17.4
Interest expense 33,550 1.2 35,658 1.8
Derivative gains and other income, net (5,143) (0.2) (3,404) (0.2)
Income before income taxes 383,511 13.8 312,271 15.7
Income tax expense 110,071 4.0 86,382 4.4
Equity in net income of unconsolidated affiliates (1,586) (0.1) (201) —
Net income 275,026 9.9 226,090 11.4
Less: net income attributable to the non-
controlling interest 3,695 0.1 1,860 0.1
Net income attributable to ADS $ 271,331 9.8 % $ 224,230 11.3 %

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Advanced Drainage Systems, Inc.

Net sales – The following table presents net sales to external customers by reportable segment for the fiscal years ended
March 31, 2022 and 2021.

(Amounts in thousands) 2022 2021 $ Variance % Variance

Pipe $ 1,539,434 $ 1,052,920 $ 486,514 46.2 %
Infiltrator 460,500 329,144 131,356 39.9
International 205,312 158,269 47,043 29.7
Allied Products & Other 564,069 442,447 121,622 27.5
Total Consolidated $ 2,769,315 $ 1,982,780 $ 786,535 39.7 %

Our consolidated net sales for the fiscal year ended March 31, 2022 increased by $786.5 million, or 39.7%, compared to
fiscal 2021. The increase in net sales was primarily a result of growth in our domestic Pipe segment along with both the
Infiltrator and International segments.

Our Pipe segment experienced growth primarily through improved pricing/mix of products sold. Infiltrator achieved
growth through improved price/mix of products sold and higher volumes associated with the residential market. The
increase in our International segment was driven by improved price/mix of products sold in the Canadian and Mexican
businesses. Growth in Allied Products & Other was driven mainly by improved price/mix of products offerings.

Cost of goods sold and Gross profit – The following table presents gross profit by reportable segment for the fiscal years
ended March 31, 2022 and 2021.

(Amounts in thousands) 2022 2021 $ Variance % Variance

Pipe $ 269,855 $ 247,266 $ 22,589 9.1 %
Infiltrator 217,432 178,296 39,136 22.0
International 53,284 44,463 8,821 19.8
Allied Products & Other 279,022 220,560 58,462 26.5
819,593 690,585 129,008 18.7
Cost of goods sold - ESOP acceleration and special
dividend compensation (19,181) — (19,181) 100.0
Intersegment eliminations (28) (503) 475 (94.4)
Total gross profit $ 800,384 $ 690,082 $ 110,302 16.0 %

Our consolidated Cost of goods sold for the fiscal year ended March 31, 2022 increased by $676.2 million or, 52.3%, and
our consolidated Gross profit increased by $110.3 million, or 16.0%, compared to the same period in fiscal 2021. The
increase in our gross profit was due to an increase in net sales from higher volumes and improved pricing and was partially
offset by inflationary pressures of higher material and transportation costs along with higher manufacturing costs and the
ESOP acceleration expense.

Selling, general and administrative expenses – The following table presents selling, general and administrative expenses as
a percentage of sales for the fiscal years ended March 31, 2022 and 2021.

(Amounts in thousands) 2022 2021 $ Variance % Variance

Selling, general and administrative $309,840 $267,574 $ 42,266 15.8 %
% of Net Sales 11.2 % 13.5 % (0.2)
Selling, general and administrative - ESOP acceleration and special
dividend compensation 11,254 — 11,254 100.0
% of Net Sales 0.4 % —% —

Selling, general and administrative expenses for the fiscal year ended March 31, 2022 increased $42.3 million from the
same period in fiscal 2021 and as a percentage of sales, decreased by 2.3%. The increase in Selling, general and

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Advanced Drainage Systems, Inc.

administrative expenses is the result of increased headcount to support business growth along with higher spend in various
areas impacted last year by COVID-19 including travel and entertainment expenses and transaction costs.

Selling, general and administrative – ESOP acceleration and special dividend compensation – In fiscal 2022, ESOP
acceleration compensation expense of $11.3 million was allocated to selling, general and administrative expenses which
did not occur in fiscal 2021.

Loss on disposal of assets and costs from exit and disposal activities – The change in Loss on disposal of assets and costs
from exit and disposal activities is primarily due to asset disposals.

Intangible amortization – Intangible amortization decreased by $9.7 million primarily due the accelerated method of
amortization for customer relationships.

Interest expense – Interest expense decreased $2.1 million for the fiscal year ended March 31, 2022 compared to the same
period in fiscal 2021. The decrease was primarily due to decreased average debt levels.

Derivative gains and other income, net – Derivative gains and other income, net increased by $1.7 million or the fiscal year
ended March 31, 2022 compared to the same period in fiscal 2021.

Income tax expense – The following table presents the effective tax rates for the fiscal years presented:

2022 2021
Effective tax rate 28.7 % 27.7 %

The increase in the effective tax rate was primarily due to stock appreciation from the ESOP shares allocated during fiscal
year 2022. See “Note 15. Income Taxes” for additional information.

Equity in net income of unconsolidated affiliates – The Equity in net income of unconsolidated affiliates increased for the
fiscal year ended March 31, 2022 compared to the same period in fiscal 2021 due to an increase in the current period
income at our South American Joint Venture.

Net income attributable to noncontrolling interest – Net income attributable to noncontrolling interest increased for the
fiscal year ended March 31, 2022 due to increased net income at our ADS Mexicana joint venture.

The discussion of our results of operations for the fiscal year ended March 31, 2021 compared with the fiscal year ended
March 31, 2020 can be found in our fiscal 2021 Form 10-K. See “Item 7. Management’s Discussion and Analysis of
Financial Discussion and Results of Operations” in our fiscal 2021 Form 10-K for further information on our prior period
results of operations.

Non-GAAP Financial Measures

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin - EBITDA, Adjusted EBITDA and Adjusted EBITDA
Margin, non-GAAP financial measures, have been presented in this Annual Report on Form 10-K as supplemental adjusted
EBITDA as net income before interest, income taxes, depreciation and amortization, stock-based compensation expense,
non-cash charges and certain other gains and expenses. We calculate Adjusted EBITDA Margin as Adjusted EBITDA
divided by net sales.

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are included in this Annual Report on Form 10-K because
they are key metrics used by management and our Board of Directors to assess our financial performance. EBITDA,
Adjusted EBITDA and Adjusted EBITDA Margin are frequently used by analysts, investors and other interested parties to
evaluate companies in our industry. In addition to covenant compliance and executive performance evaluations, we use
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to supplement GAAP measures of performance to evaluate
the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of
other peer companies using similar measures.

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are not GAAP measures of our financial performance and
should not be considered as alternatives to net income as measures of financial performance or cash flows from operations
or any other performance measure derived in accordance with GAAP, and it should not be construed as an inference that

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Advanced Drainage Systems, Inc.

our future results will be unaffected by unusual or non-recurring items. EBITDA, Adjusted EBITDA and Adjusted
EBITDA Margin contain certain other limitations, including the failure to reflect our cash expenditures, cash requirements
for working capital needs and cash costs to replace assets being depreciated and amortized. In evaluating EBITDA,
Adjusted EBITDA and Adjusted EBITDA Margin, you should be aware that in the future we will incur expenses that are
the same as or similar to some of the adjustments in this presentation, such as stock-based compensation expense,
derivative fair value adjustments, and foreign currency transaction losses. Management compensates for these limitations
by relying on our GAAP results in addition to using EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin on a
supplemental basis. Our measure of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are not necessarily
comparable to other similarly titled captions of other companies due to different methods of calculation.

(Amounts in thousands) 2022 2021 2020

Net income (loss) $ 275,026 $ 226,090 $ (191,797)
Depreciation and amortization 141,808 145,586 124,940
Interest expense 33,550 35,658 82,711
Income tax expense 110,071 86,382 14,092
EBITDA 560,455 493,716 29,946
Loss on disposal of assets and costs from exit and disposal activities 3,398 4,275 5,338
ESOP and stock-based compensation expense 77,559 65,434 32,395
(a)
ESOP acceleration and special dividend compensation 30,435 — 246,752
(b)
Transaction costs 3,539 1,415 22,896
Inventory step up related to the Acquisition of Infiltrator — — 7,880
(c)
Strategic growth and operational improvement initiatives — 3,304 6,659
(d)
COVID-19 related expenses — 806 5,081
(e)
Other adjustments 656 (1,995) 4,921
Adjusted EBITDA $ 676,042 $ 566,955 $ 361,868
Adjusted EBITDA Margin 24.4 % 28.6 % 21.6 %

(a) Includes the impact of two ESOP allocation events. In the fourth quarter of fiscal 2022, the approximately 0.3
million remaining unallocated shares of Preferred Stock were allocated on March 31, 2022 after repayment of the
ESOP loan. See “Note 13. Employee Benefit Plans” for additional information. In the first quarter of fiscal 2020,
the Company paid a special dividend of $1.00 per share. The dividend was used to pay back a portion of the ESOP
loan resulting in $246.8 million in additional stock-based compensation. See “Note 16. Net Income Per Share and
Stockholders’ Equity” for additional information.
(b) Represents expenses recorded related to legal, accounting and other professional fees incurred in connection with
business or asset acquisitions and dispositions.
(c) Represents professional fees incurred in connection with our strategic growth and operational improvement
initiatives, which included various market feasibility assessments and acquisition strategies, along with our
operational improvement initiatives, which included evaluation of our manufacturing network and improvement
initiatives.
(d) Includes expenses in connection with our response to the COVID-19 pandemic including pandemic pay, see “Note
13. Employee Benefit Plans” for additional information, and crisis management.
(e) Includes derivative fair value adjustments, foreign currency transaction (gains) losses, the proportionate share of
interest, income taxes, depreciation and amortization related to the South American Joint Venture, which is
accounted for under the equity method of accounting, contingent consideration remeasurement, executive
retirement expense (benefit) and legal settlements.

Liquidity and Capital Resources

Historically we have funded our operations through internally generated cash flow supplemented by debt financings, equity
issuance and finance and operating leases. These sources have been sufficient historically to fund our primary liquidity
requirements, including working capital, capital expenditures, debt service and dividend payments for our convertible
preferred stock and common stock. 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.

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Advanced Drainage Systems, Inc.

The following table presents key liquidity metrics utilized by management. The table includes the Non-GAAP measure,
Free cash flow, which is further discussed and defined below.

(Amounts in thousands) 2022 2021

Net cash provided by operating activities $ 274,888 $ 452,216
Capital expenditures (149,083) (78,757)
Free cash flow 125,805 373,459
Total debt (debt and finance lease obligations) 944,638
Cash 20,125
Net debt (total debt less cash) 924,513
Leverage ratio 1.4

The following table summarizes our available liquidity under our Revolving Credit Facility as of March 31, 2022:

(Amounts in thousands) 3/31/2022

Revolver capacity $ 350,000
Less: outstanding borrowings 114,300
Less: letters of credit 9,200
Revolver available liquidity $ 226,500

In addition to the available liquidity above, we have the ability to borrow up to $1.3 billion under our Term Loan Facility,
subject to leverage ratio restrictions.

As of March 31, 2022, we had $12.9 million in cash that was held by our foreign subsidiaries, including $5.4 million held
by our Canadian subsidiaries. We continue to evaluate our strategy regarding foreign cash, but our earnings in foreign
subsidiaries still remain indefinitely reinvested, except for Canada. See “Note 15. Income Taxes” for additional discussion
of our plans to repatriate earnings from Canada.

Free Cash Flow - Free cash flow is a non-GAAP financial measure that comprises cash flow from operations less capital
expenditures. Free cash flow is a measure used by management and our Board of Directors to assess our ability to generate
cash. Accordingly, free cash flow has been presented in this Annual Report on Form 10-K as a supplemental measure of
liquidity that is not required by, or presented in accordance with GAAP, because management believes that free cash flow
provides useful information to investors and others in understanding and evaluating our ability to generate cash flow from
operations after capital expenditures.

Free cash flow is not a GAAP measure of our liquidity and should not be considered as an alternative to cash flow from
operating activities as a measure of liquidity or any other liquidity measure derived in accordance with GAAP. Our
measure of free cash flow is not necessarily comparable to other similarly titled captions of other companies due to
different methods of calculation.

(Amounts in thousands) 2022 2021 2020

Cash flow from operating activities $ 274,888 $ 452,216 $ 306,189
Capital expenditures (149,083) (78,757) (67,677)
Free cash flow $ 125,805 $ 373,459 $ 238,512

Working Capital and Cash Flows

Our use of cash in fiscal 2022, of $174.9 million, was predominantly driven by the $292.0 million in share repurchases net
of incremental borrowings during fiscal 2022, offset by cash generated from operations in excess of investments in
working capital and capital expenditures. Cash in fiscal 2021 increased by $20.8 million primarily from cash generated
from operations net of payments on our Term Loan Facility and Revolving Credit Facility. During fiscal 2020, our net
increase in cash amounted to $165.3 million. Our sources of funds in fiscal 2020 were primarily driven by borrowings
under the Term Loan Facility, Senior Notes and Revolving Credit Facility, proceeds from our Common Stock Offering and

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Advanced Drainage Systems, Inc.

an increase in cash provided by operating activities. Our use of cash during fiscal 2020 was primarily related to the
Acquisition and repayment of our previous debt arrangements.

As of March 31, 2022, we had $246.6 million in liquidity, including $20.1 million of cash, $226.5 million in borrowings
available under our Revolving Credit Facility, excluding $9.2 million of outstanding letters of credit. We believe that our
cash on hand, together with the availability of borrowings under our Revolving Credit Facility and cash generated from
operations, will be sufficient to meet our working capital requirements, anticipated capital expenditures and scheduled
interest payments on our indebtedness for at least the next twelve months.

Working Capital - Working capital is an indication of liquidity and potential need for short-term funding. We define
working capital as current assets less current liabilities.

Working capital increased to $480.7 million as of March 31, 2022, from $424.7 million as of March 31, 2021, primarily
due to the increases in inventory related to the inflationary cost of resin and increased quantities to support demand, as well
as increased accounts receivable and accounts payable which increased consistent with the increase in net sales and
inventory, offset by the use of cash during the fiscal year.

Working capital decreased to $424.7 million as of March 31, 2021, from $428.0 million as of March 31, 2020, primarily
due to an increase in accounts payable, due to improved payment terms, offset by increased accounts receivable and
inventory due to increased sales.

Operating Cash Flows - During fiscal 2022, cash provided by operating activities was $274.9 million. Cash flow from
operating activities in fiscal 2022 was primarily driven by operating income offset by investments in working capital.

During fiscal 2021, cash provided by operating activities was $452.2 million as compared with cash provided by operating
activities of $306.2 million for fiscal 2020. Cash flow from operating activities during fiscal 2021 was primarily impacted
by increased income from continuing operations and improvements in payment terms on accounts payable.

During fiscal 2020, cash provided by operating activities was $306.2 million. Cash flow from operating activities during
fiscal 2020 was primarily impacted by changes in working capital, including improved collections from accounts
receivable, faster inventory turns and extension of terms of our accounts payable.

Investing Cash Flows - During fiscal 2022, cash used for investing activities was $198.8 million. The increase in cash used
for investing cash flows was primarily due to elevated capital expenditures and the acquisition of Jet Polymer Recycling.
Our capital expenditures in fiscal 2022 were used primarily to support growth, but also to support our recycled resin and
technology improvement initiatives.

During fiscal 2021, cash used for investing activities was $77.9 million. The decrease in cash used for investing activities
was primarily due to the acquisition of Infiltrator in fiscal 2020. Capital expenditures was $78.8 million compared to $67.7
million in fiscal 2020. Our capital expenditures in fiscal 2021 were used primarily to support facility expansions,
equipment replacements, our recycled resin and technology improvement initiatives.

During fiscal 2020, cash used for investing activities was $1,150.5 million. The cash used for investing activities was
primarily due to the acquisition of Infiltrator, net of cash acquired, in fiscal 2020. Our capital expenditures in fiscal 2020 of
$67.7 million were used primarily to support facility improvements, equipment replacements, our recycled resin and
operating efficiency initiatives and technology.

We currently anticipate that we will make capital expenditures of approximately $150 to $180 million in fiscal 2023 to
focus on growth and productivity through increasing our manufacturing capacity and investing in automation. Such capital
expenditures are expected to be financed using funds generated by operations. We had approximately $80 million of open
orders through purchase commitments as of March 31, 2022.

Financing Cash Flows – During fiscal 2022, cash used in financing activities was $251.1 million. During fiscal 2022, ADS
repurchased shares for $292.0 million.

During fiscal 2021, cash used in financing activities was $354.5 million, due to payments on the Term Loan Facility of
$207.0 million and the Revolving Credit Facility of $100.0 million. In addition, we made dividend payments of $32.1
million and $21.5 million on our finance lease obligations.

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Advanced Drainage Systems, Inc.

During fiscal 2020, cash provided by financing activities was $1,011.6 million, due to the new Term Loan Facility, Senior
Notes and Common Stock Offering. These cash inflows were offset by the repayment of the PNC Credit Agreement and
Prudential Senior Notes, the special and quarterly dividend payments of $92.1 million and payments on our finance lease
obligations of $27.1 million.

Employee Stock Ownership Plan (“ESOP”)

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 occurred in March 2022, the ESOP committee directed
the shares of redeemable convertible preferred stock owned by the ESOP to be converted into shares of the Company’s
common stock.

The Company was 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 was recognized based upon the average annual fair value of the shares during the
period which ADS received payments on the term loan, and the number of ESOP shares allocated to participant accounts.

Following the repayment of the ESOP loan discussed above, the ESOP’s conversion of redeemable convertible preferred
stock into common stock will impact the Company’s net income, net income per share and common shares outstanding as
follows (with the outstanding shares of common stock being approximately 19% greater after conversion).

Impact on Net Income – Provided that the converted common stock do not qualify as participating securities, the Company
will no longer be required to apply the two-class method to determine Net income per share once all of the redeemable
convertible preferred stock is converted into common stock. After the preferred shares are fully allocated upon the
repayment of the ESOP loan and all of the redeemable convertible preferred stock is converted into common stock, the
Company will no longer incur the fair value of ESOP deferred compensation attributable to the shares of redeemable
convertible preferred shares.

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. Additional ESOP compensation expense was
recorded for the acceleration of the remaining loan payment in the fourth quarter of fiscal 2022 and the repayment of a
significant portion of the ESOP loan, through the special dividend, in fiscal 2020.

(Amounts in thousands) 2022 2021 2020

Net (loss) income attributable to ADS $ 271,331 $ 224,230 $ (193,174)
ESOP acceleration and special dividend compensation 30,435 — 246,752
ESOP deferred stock-based compensation 53,401 44,981 20,126

Impact on Common Stock Outstanding – The impact on the number of common shares outstanding will be as shares are
converted, the number of common shares outstanding will increase.

(Shares in millions) 2022 2021 2020

Weighted average common shares outstanding 71.3 70.2 63.8
Conversion of redeemable convertible shares 13.6 16.0 17.1

Debt and Capitalized Lease Obligations

See “Note 5. Leases” and “Note 11. Debt” to our consolidated financial statements included in “Item 8. Financial
Statements and Supplementary Data” for a discussion of the Company’s financing transactions, including the Secured
Bank Loans, the Senior Notes and the Company’s finance lease obligations.

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Advanced Drainage Systems, Inc.

Financing Transactions

Bridge Credit Facility – On July 31, 2019, we entered into the Base Credit Agreement with Barclays Bank PLC, as
administrative agent and the several lenders from time to time party thereto. The Base 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 Base Credit Agreement which was used to (i) finance the merger
consideration paid in connection with the closing of the acquisition of Infiltrator by us which occurred on July 31, 2019
(the “Merger”), (ii) repay the total outstanding amount as of the closing date of the Merger under its credit agreements, (iii)
repay outstanding amounts of existing indebtedness incurred by Infiltrator under its outstanding credit facility in effect
prior to the Merger, and (iv) pay certain transaction fees and expenses associated with the Merger and the Base Credit
Agreement.

New Senior Secured Credit Facility - On September 24, 2019, the joint lead arrangers informed the Company that the
parties had successfully completed a syndication of the remaining balance of the Bridge Credit Facility. The Senior
Secured Credit Facility provided for a Term Loan Facility with an initial aggregate amount of $700 million, up to $350
million as a Revolving Facility, and up to $50 million as a letter of credit facility, as a sublimit of the Revolving Facility.

The Term Loan Facility has an amortization feature equal to 1% of the original $700 million balance paid 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 September 26, 2026. 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 September 29, 2024.

The Senior Secured Credit Facility 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 Senior Secured Credit Facility) or at a
Eurocurrency Rate, based on LIBOR (as defined in the Senior Secured Credit Facility), 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 Senior Secured Credit Facility). 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 Senior Secured Credit Facility).

The Company’s obligations under the Credit Agreement have been secured by granting a first priority lien on substantially
all of the Company’s assets (subject to certain exceptions and limitations), and each of StormTech, LLC, Advanced
Drainage of Ohio, Inc. and Infiltrator Water Technologies, LLC (collectively the “Guarantors”) has agreed to guarantee the
obligations of the Company under the Senior Secured Credit Facility 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).

Senior Notes due 2027 - On September 23, 2019, the Company issued $350.0 million aggregate principal amount of its
senior notes (“Senior Notes”), pursuant to the Indenture among the Company, the Guarantors and the trustee. The Senior
Notes are guaranteed by each of the Company’s present and future direct and indirect wholly owned domestic subsidiaries
that is a guarantor under the Company’s Senior Secured Credit Facility. The Senior Notes were offered and sold either to
persons reasonably believed to be “qualified institutional buyers” pursuant to Rule 144A under the Securities Act of 1933
(the “Securities Act”) or to persons outside the United States under Regulation S of the Securities Act.

Interest on the Senior Notes is payable semi-annually in cash in arrears on March 31 and September 30 of each year,
commencing on March 31, 2020, at a rate of 5.000% per annum. The Senior Notes mature on September 30, 2027. The
Company used the majority of the net proceeds from the offering of the Senior Notes for the repayment of $300.0 million
of its outstanding borrowings under the Company’s Bridge Credit Facility.

The Company may redeem the Senior Notes, in whole or in part, at any time on or after September 30, 2022 at established
redemption prices. At any time prior to September 30, 2022, the Company may also redeem up to 40% of the Senior Notes
with net cash proceeds of certain equity offerings at a redemption price equal to 105.000% of the principal amount of the
Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, at

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any time prior to September 30, 2022, the Company may redeem the Senior Notes, in whole or in part, at a redemption
price equal to 100% of the principal amount of the Senior Notes to be redeemed, plus accrued and unpaid interest, if any,
to, but excluding, the redemption date plus an applicable "make-whole" premium.

The Indenture contains customary events of default, including, among other things, payment default, failure to comply with
covenants or agreements contained in the Indenture or the Senior Notes and certain provisions related to bankruptcy events.
The Indenture also contains customary negative covenants.

Covenant Compliance

The Senior Secured Credit Facility requires, if the aggregate amount of outstanding exposure under the Revolving Facility
exceeds $122.5 million 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 Senior Secured Credit Facility 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 Senior Secured Credit Facility) to pay dividends or make
distributions to the Company or any of its subsidiaries.

The Senior Secured Credit Facility 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 Senior Secured Credit Facility); (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 Senior Secured Credit Facility.

For further information, see “Note 11. Debt” to the Consolidated Financial Statements. We were in compliance with our
debt covenants as of March 31, 2022.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, with the exception of the guarantee of 50% of certain debt of our
unconsolidated South American Joint Venture, as further discussed in “Note 10. Related Party Transactions” of our
Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data,” of this Form 10-K.
Our maximum potential obligation under this guarantee totals $11 million as of March 31, 2022. The maximum borrowing
permitted under the South American Joint Venture’s credit agreement is $22 million. As of March 31, 2022, our South
American Joint Venture had approximately $9.9 million of outstanding debt subject to our guarantee, resulting in our
guarantee of 50%, or $5.0 million, of that amount. We do not believe that this guarantee will have a current or future effect
on our financial condition, results of operations, liquidity, or capital resources.

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations are based on our consolidated financial
statements, which have been prepared in accordance with GAAP. The preparation of the consolidated financial statements
requires management to make estimates and judgments that affect the reported amounts in our consolidated financial
statements and accompanying notes.

Certain of our accounting policies involve a higher degree of judgment and complexity in their application, and therefore,
represent the critical accounting policies used in the preparation of our financial statements. If different assumptions or
conditions were to prevail, the results could be materially different from our reported results. We believe the following
accounting policies may involve a higher degree of judgment and complexity in their application and represent the critical
accounting policies used in the preparation of our financial statements. For additional discussion of our significant

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Advanced Drainage Systems, Inc.

accounting policies, see “Note 1. Background and Summary of Significant Accounting Policies” to our consolidated
financial statements included in “Item 8. Financial Statements and Supplementary Data” included in this Form 10-K.

Effect if Actual Results Differ from

Policy Judgments and Estimates Assumptions
Goodwill- Goodwill is reviewed Determining the fair value of a We performed our annual impairment
annually for impairment as of March reporting unit is judgmental in nature test for goodwill for all reporting units
31 or whenever events or changes in and involves the use of significant as of March 31, 2022 using a
circumstances indicate the carrying estimates and assumptions. qualitative approach. We determined
value may not be recoverable. The fair • Estimates and assumptions for our goodwill that it was not more
value of goodwill is determined by including revenue growth rates likely than not that the fair value of the
considering both the income and and EBITDA used to calculate assets exceeded carrying value for
market approach. projected future cash flows, fiscal years ended March 31, 2022.
risk-adjusted discount rates, Future events and unanticipated
future economic and market changes to assumptions could require a
conditions, and determination provision for impairment in a future
of appropriate market period.
comparables.
• The fair value estimates are
based on assumptions
management believes to be
reasonable but are inherently
uncertain.

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Advanced Drainage Systems, Inc.

Effect if Actual Results Differ from

Policy Judgments and Estimates Assumptions
Definite-lived intangible assets- Determining the fair value of the We did not record any impairment
Definite-lived intangible assets are definite-lived and indefinite-lived charges for definite-lived intangible
tested for recoverability whenever intangible assets is judgmental in assets in fiscal 2022, 2021, or 2020.
events or changes in circumstances nature and involves the use of
indicate that carrying amounts of the significant estimates and assumptions. We performed our annual impairment
asset group may not be recoverable. test for indefinite-lived intangible
Asset groups are established primarily assets as of March 31, 2022. We
by determining the lowest level of cash performed a qualitative impairment
flows available. If the estimated analysis and determined for our
undiscounted future cash flows are less indefinite-lived intangible assets that it
than the carrying amounts of such was not more likely than not that the
assets, an impairment loss is fair value of the assets exceeded
recognized to the extent the fair value carrying value for fiscal years ended
of the asset less any costs of disposition March 31, 2022. Future events and
is less than the carrying amount of the unanticipated changes to assumptions
asset. could require a provision for
impairment in a future period.
Indefinite-lived intangible assets-
Indefinite-lived intangible assets are
tested for impairment annually as of
March 31 or whenever events or
changes in circumstances indicate the
carrying value may be greater than fair
value. Determining the fair value of
these assets is judgmental in nature and
involves the use of significant estimates
and assumptions. We base our fair
value estimates on assumptions we
believe to be reasonable, but that are
inherently uncertain. To estimate the
fair value of these indefinite-lived
intangible assets, we use an income
approach, which utilizes a market
derived rate of return to discount
anticipated performance. An
impairment loss is recognized when the
estimated fair value of the intangible
asset is less than the carrying value.

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Advanced Drainage Systems, Inc.

Effect if Actual Results Differ from

Policy Judgments and Estimates Assumptions
Revenue Recognition- We generate We estimate and allocate variable If our historical experience differs from
revenue by selling pipe and related consideration, such as right of return, future experience, our estimates of
water management products primarily credits or incentives, based on variable consideration could differ.
to distributors, retailers, buying groups numerous factors, including the
and co-operative buying groups. customer agreements and past
Products are shipped predominately by transaction history.
our internal fleet, and we do not
provide any additional revenue
generating services after product
delivery. Payment terms and conditions
vary by contract.

Revenue is recognized at the point in-

time obligations under the terms of a
contract with a customer are satisfied,
which generally occurs upon the
transfer of control of the promised
goods. In substantially all of our
contracts with customers, control is
transferred to the customer upon
delivery. We recognize revenue in an
amount that reflects the consideration
we expect to be entitled to in exchange
for those goods or services.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see “Note 1. Background and Summary of Significant Accounting
Policies” to our consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data.”

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are subject to various market risks, primarily related to changes in interest rates, credit risk, 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.

Interest Rate Risk - We are subject to interest rate risk associated with our bank debt. Changes in interest rates impact the
fair value of our fixed-rate debt, but there is no impact to earnings and cash flow. Alternatively, changes in interest rates do
not affect the fair value of our variable-rate debt, but they do affect future earnings and cash flow. The Revolving Credit
Facility and the Term Note, notes bear variable interest rates. The Revolving Credit Facility and Term Note bear interest
either at LIBOR or the Prime Rate, at our option, plus applicable pricing margins. A 1.0% increase in interest rates on our
variable-rate debt would increase our annual forecasted interest expense by approximately $5.4 million based on our
borrowings as of March 31, 2022. Assuming the Revolving Credit Facility is fully drawn, each 1.0% increase or decrease
in the applicable interest rate would change our interest expense by approximately $7.8 million, for the year ended
March 31, 2022.

Credit Risk - Financial instruments that potentially subject us to a concentration of credit risk consist principally of
accounts receivable. We provide our products to customers based on an evaluation of the customers’ financial condition,
generally without requiring collateral. Exposure to losses on receivables is principally dependent on each customer’s
financial condition. We monitor the exposure for credit losses and maintain allowances for anticipated losses.
Concentrations of credit risk with respect to our accounts receivable are limited due to the large number of customers
comprising our customer base and their dispersion among many different geographies and end markets.

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Advanced Drainage Systems, Inc.

Raw Material and Commodity Price Risk - Our primary raw materials used in the production of our products are HDPE
and PP resins. As these resins are hydrocarbon-based materials, changes in the price of feedstocks, such as crude oil
derivatives and natural gas liquids, as well as changes in the market supply and demand may cause the cost of these resins
to fluctuate significantly. Raw materials account for the majority of our cost of goods sold. Given the significance of these
costs and the inherent volatility in supplier pricing, our ability to reflect these changes in the cost of resins in our product
selling prices in an efficient manner contributes to the management of our overall risk and the potential impact on our
results of operations. A 1% increase in the price of resin would increase our cost of goods sold by approximately
$5.9 million.

We also maintain supply agreements with our major resin suppliers that provide multi-year terms and volumes that are in
excess of our projected consumption. These supply agreements generally do not contain minimum purchase volumes or
fixed prices. Accordingly, our suppliers may change their selling prices or other relevant terms on a monthly basis,
exposing us to pricing risk.

Inflation Risk - Our cost of goods sold is subject to inflationary pressures and price fluctuations of the raw materials we
use, primarily HDPE and PP resins. Historically, we have generally been able, over time, to recover the effects of inflation
and price fluctuations through sales price increases and production efficiencies related to technological enhancements and
improvements. However, we cannot reasonably estimate our ability to successfully recover any price increases.

Foreign Currency Exchange Rate Risk - We have operations in countries outside of the United States, which primarily
use the respective local foreign currency as their functional currency. Each of these operations may enter into contractual
arrangements with customers or vendors that are denominated in currencies other than its respective functional currency.
Consequently, our results of operations may be affected by exposure to changes in foreign currency exchange rates and
economic conditions in the regions in which we sell or distribute our products. Exposure to variability in foreign currency
exchange rates from these transactions is managed, to the extent possible, by natural hedges which result from purchases
and sales occurring in the same foreign currency within a similar period of time, thereby offsetting each other to varying
degrees.

In addition to the foreign currency transaction-related gains and losses that are reflected within the results of operations, we
are subject to foreign currency translation risk, as the financial statements for our foreign subsidiaries are measured and
recorded in the respective subsidiary’s functional currency and translated into U.S. dollars for consolidated financial
reporting purposes. The resulting translation adjustments are recorded net of tax impact in the Consolidated Statements of
Comprehensive Income (Loss).

Item 8. Financial Statements and Supplementary Data

The Report of Independent Registered Public Accounting Firm, Consolidated Financial Statements and supplementary
financial data required for this Item are set forth on pages F-1 through F-41 of this Annual Report on Form 10-K and are
incorporated herein by reference. Our independent registered public accounting firm is Deloitte & Touche LLP, Columbus,
Ohio, Public Company Accounting Oversight Board ID Number: 34

Item 9. Changes in and Disagreements with Accountant on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief
Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of March 31, 2022.
Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified
under Securities Exchange Commission (“SEC”) rules and forms. 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.

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Advanced Drainage Systems, Inc.

Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were effective as of March 31, 2022.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term
is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Management, including our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of our
internal control over financial reporting as of March 31, 2022. In making this assessment, management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control —
Integrated Framework (2013). A material weakness in internal controls is a deficiency, or a combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our
annual or interim financial statements will not be prevented or detected on a timely basis. Because of its inherent
limitations, even appropriate internal control over financial reporting may not prevent or detect misstatements.

Based on this assessment, management has concluded that the Company’s internal control over financial reporting was
effective as of March 31, 2022.

Deloitte & Touche LLP, our independent registered public accounting firm, has issued an audit report on the effectiveness
of our internal control over financial reporting as of March 31, 2022 and this report is included herein.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to
Rules 13a15(d) or 15d-15(d) of the Exchange Act during the quarter ended March 31, 2022 that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

44
Advanced Drainage Systems, Inc.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information contained under the captions “EXECUTIVE OFFICERS”, “ELECTION OF DIRECTORS” and
“OTHER DIRECTOR INFORMATION, COMMITTEES OF DIRECTORS AND CORPORATE GOVERNANCE
INFORMATION” in our definitive Proxy Statement for the 2022 Annual Meeting of Shareholders, to be filed with the
SEC pursuant to Regulation 14A promulgated under the Exchange Act (the “Proxy Statement”), is incorporated herein by
reference.

Item 11. Executive Compensation

The information contained under the captions “COMPENSATION OF MANAGEMENT,” “OTHER DIRECTOR
INFORMATION, COMMITTEES OF DIRECTORS AND CORPORATE GOVERNANCE INFORMATION”,
“REPORT OF THE COMPENSATION COMMITTEE” and “COMPENSATION DISCUSSION AND
ANALYSIS” in the Proxy Statement is incorporated herein by reference. Notwithstanding the foregoing, the information
contained in the Proxy Statement under the caption “REPORT OF THE COMPENSATION COMMITTEE” shall be
deemed furnished, and not filed, in this Report on Form 10-K and shall not be deemed incorporated by reference into any
filing we make under the Securities Act of 1933, as amended, or the Exchange Act.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters

The information contained under the caption “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT” and “EQUITY COMPENSATION PLAN INFORMATION” in the Proxy Statement is
incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information contained under the captions “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS”
and “OTHER DIRECTOR INFORMATION, COMMITTEES OF DIRECTORS AND CORPORATE
GOVERNANCE INFORMATION” in the Proxy Statement is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information contained under the caption “AUDIT AND OTHER SERVICE FEES” in the Proxy Statement is
incorporated herein by reference.

45
Advanced Drainage Systems, Inc.

PART IV

Item 15. Exhibits and Financial Statement Schedules

1. Financial Statements. See “Table of Contents” on page F-1.
2. Financial Statement Schedules. Schedule II - Consolidated Valuation and Qualifying Accounts.
Other schedules are omitted because they are not required or applicable, or the required information is included in our
consolidated financial statements or related notes.
3. Exhibits. See “Index to Exhibits.”

INDEX TO EXHIBITS
Exhibit
Number Description
3.1 Amended and Restated Certificate of Incorporation of Advanced Drainage Systems, Inc.
(incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No.
001-36557) filed with the Securities and Exchange Commission on July 30, 2014).

3.1A Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to

the Registrant’s Current Report on Form 8-K (File No. 001-36557) filed with the Securities and
Exchange Commission on July 24, 2020).

3.2 Second Amended and Restated Bylaws of Advanced Drainage Systems, Inc. (incorporated by
reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (File No. 001-36557) filed
with the Securities and Exchange Commission on July 30, 2014).

3.2A First Amendment to Second Amended and Restated Bylaws of Advanced Drainage Systems, Inc.
(incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (File No.
001-36557) filed with the Securities and Exchange Commission on July 24, 2020).

4.1 Form of Preferred Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 5 to
the Registrant’s Registration Statement on Form S-1 (File No. 333-194980) filed with the Securities
and Exchange Commission on July 14, 2014).

4.2 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.2 to Amendment No. 5 to
the Registrant’s Registration Statement on Form S-1 (File No. 333-194980) filed with the Securities
and Exchange Commission on July 14, 2014).

4.3 Registration Rights Agreement, dated as of July 30, 2014, by and among Advanced Drainage
Systems, Inc. and the stockholders from time to time party thereto (incorporated by reference to
Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36557) filed with the
Securities and Exchange Commission on July 30, 2014).

4.4 Description of Registrant's Securities.

4.5 Indenture, dated September 23, 2019, among Advanced Drainage Systems, Inc., each of the
guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to
Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36557) filed with the
Securities and Exchange Commission on September 23, 2019).

4.6 Form of 5.000% Senior Notes due 2027 (included with Indenture, dated September 23, 2019, among
Advanced Drainage Systems, Inc., each of the guarantors party thereto and U.S. Bank National
Association, as trustee) (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on
Form 8-K (File No. 001-36557) filed with the Securities and Exchange Commission on September 23,
2019).

4.7 First Supplemental Indenture, dated March 31, 2021 among Advanced Drainage Systems, Inc., each
of the guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by
reference to Exhibit 4.7 to the Registrant’s Annual Report on Form 10-K (File No. 001-36557) filed
with the Securities and Exchange Commission on May 27, 2021).

46
Advanced Drainage Systems, Inc.

Exhibit
Number Description
4.8 Shareholder Agreement, dated as of August 19, 2021, by and between Advanced Drainage Systems,
Inc. and Canada Pension Plan Investment Board (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K (File No. 001-36557) filed with the Securities and Exchange
Commission on August 20, 2021).

4.9 Registration Rights Agreement, dated as of August 19, 2021, by and between Advanced Drainage
Systems, Inc. and Canada Pension Plan Investment Board (incorporated by reference to Exhibit 10.2
to the Registrant’s Current Report on Form 8-K (File No. 001-36557) filed with the Securities and
Exchange Commission on August 20, 2021).

10.1 Credit Agreement, dated as of July 31, 2019, by and among Advanced Drainage Systems, Inc.,
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, joint
bookrunners, syndication agents and documentation agents (incorporated by reference to Exhibit 10.1
to the Registrant’s Current Report on Form 8-K (File No. 001-36557) filed with the Securities and
Exchange Commission on August 1, 2019).

10.1A First Amendment to Credit Agreement, by and among the Advanced Drainage Systems, Inc., the
banks and other financial institutions or entities parties thereto, constituting all the Lenders under the
Credit Agreement, the Issuing Lenders party thereto and Barclays Bank PLC, as administrative agent
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.
001-36557) filed with the Securities and Exchange Commission on September 30, 2019).

10.2 Advanced Drainage Systems, Inc. Guarantee and Collateral Agreement (incorporated by reference to
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-36557) filed with the
Securities and Exchange Commission on August 1, 2019).

10.4† Advanced Drainage Systems, Inc. Amended 2000 Incentive Stock Option Plan (incorporated by
reference to Exhibit 10.9 to Amendment No. 3 to the Registrant’s Registration Statement on Form S-1
(File No. 333-194980) filed with the Securities and Exchange Commission on June 20, 2014).

10.4A† First Amendment to Amended 2000 Incentive Stock Option Plan (incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36557) filed with the
Securities and Exchange Commission on August 15, 2014).

10.5† Advanced Drainage Systems, Inc. 2008 Restricted Stock Plan (incorporated by reference to Exhibit
10.10 to Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 (File No.
333-194980) filed with the Securities and Exchange Commission on June 20, 2014).

10.5A† First Amendment to the 2008 Restricted Stock Plan (incorporated by reference to Exhibit 10.2 to
Form 8-K filed February 10, 2017).

10.6† Advanced Drainage Systems, Inc. 2013 Stock Option Plan (incorporated by reference to Exhibit 10.11
to Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 (File No. 333-194980)
filed with the Securities and Exchange Commission on June 20, 2014).

10.6A† First Amendment to 2013 Stock Option Plan (incorporated by reference to Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K (File No. 001-36557) filed with the Securities and Exchange
Commission on August 15, 2014).

10.6B† Form of Amendment to Pre-2017 Stock Option Agreements (incorporated by reference to Exhibit
10.11B of Form 10-K filed May 10, 2017).

10.6C† Form of Amendment to Pre-2017 Stock Option Agreements (incorporated by reference to Exhibit
10.11B of Form 10-K filed May 10, 2017).

10.7† Executive Employment Agreement, dated as of September 1, 2017, by and between Advanced
Drainage Systems, Inc. and D. Scott Barbour (incorporated by reference to Exhibit 10.3 to Form 8-K
filed August 17, 2017).

47
Advanced Drainage Systems, Inc.

Exhibit
Number Description

10.10† Amended and Restated Executive Employment Agreement, dated as of June 20, 2014, by and
between Advanced Drainage Systems, Inc. and Ronald R. Vitarelli (incorporated by reference to
Exhibit 10.15 to Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 (File No.
333-194980) filed with the Securities and Exchange Commission on June 20, 2014).

10.11† Amended and Restated Executive Employment Agreement, dated as of June 20, 2014, by and
between Advanced Drainage Systems, Inc. and Robert M. Klein (incorporated by reference to Exhibit
10.16 to Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 (File No.
333-194980) filed with the Securities and Exchange Commission on June 20, 2014).

10.12† Form of Indemnification Agreement (incorporated by reference to Exhibit 10.6 to Amendment No. 2
to the Registrant’s Registration Statement on Form S-1 (File No. 333-194980) filed with the
Securities and Exchange Commission on June 6, 2014).

10.10† Form of Incentive Stock Option Agreement pursuant to 2000 Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.18 to Amendment No. 3 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-194980) filed with the Securities and Exchange Commission on
June 20, 2014).

10.10A† Form of Incentive Stock Option Agreement (post-IPO) pursuant to 2000 Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.18A to Form 10-K for the year ended March 31, 2015 filed
with the Securities and Exchange Commission on March 29, 2016).

10.14† Form of Non-Qualified Stock Option Agreement (other than for Joseph A. Chlapaty) pursuant to 2013
Stock Option Plan (incorporated by reference to Exhibit 10.19 to Amendment No. 3 to the
Registrant’s Registration Statement on Form S-1 (File No. 333-194980) filed with the Securities and
Exchange Commission on June 20, 2014).

10.15† Form of Restricted Stock Agreement (other than for Joseph A. Chlapaty) pursuant to 2008 Restricted
Stock Plan (incorporated by reference to Exhibit 10.20 to Amendment No. 3 to the Registrant’s
Registration Statement on Form S-1 (File No. 333-194980) filed with the Securities and Exchange
Commission on June 20, 2014).

10.16† Form of Director Stock Agreement (incorporated by reference to Exhibit 10.21 to Amendment No. 4
to the Registrant’s Registration Statement on Form S-1 (File No. 333-194980) filed with the
Securities and Exchange Commission on July 2, 2014).

10.17 Participation Agreement, dated as of July 17, 2000, by and between ADS Worldwide, Inc., Grupo
Altima S.A. de C.V., and ADS Mexicana, S.A. de C.V. (formerly known as Sistemas Ecologicos de
Drenaje, S.A. de C.V.), as amended on April 19, 2010, May 19, 2011, May 24, 2011, April 26, 2013
and January 31, 2014 (incorporated by reference to Exhibit 10.22 to Amendment No. 2 to the
Registrant’s Registration Statement on Form S-1 (File No. 333-194980) filed with the Securities and
Exchange Commission on June 6, 2014).

10.18 Interestholders Agreement, dated as of June 5, 2009, by and among Tubos y Plasticos ADS Chile
Limitada, Tigre Chile S.A., and Tuberias T-A Limitada, joined by Advanced Drainage Systems, Inc.
and Tigre S.A. — Tubos e Conexoes, as amended on July 31, 2009, October 2009, December 15,
2009, May 18, 2010, August 10, 2010, April 1, 2011 and January 25, 2012, with First Addendum to
Interestholders Agreement, dated as of June 27, 2011 (incorporated by reference to Exhibit 10.23 to
Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 (File No. 333-194980) filed
with the Securities and Exchange Commission on June 20, 2014).

10.18A Second Addendum to Interestholders Agreement, dated as of December 1, 2013 but entered into on
September 30, 2014, by and among Tubos y Plasticos ADS Chile Limitada, Tigre Chile S.A.,
Tuberias Tigre-ADS Limitada, Advanced Drainage Systems, Inc. and Tigre S.A. — Tubos e
Conexoes (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-
Q (File No. 001-36557) filed with the Securities and Exchange Commission on November 10, 2014).

48
Advanced Drainage Systems, Inc.

Exhibit
Number Description
10.19† Executive Employment Agreement dated November 9, 2015, by and between the Company and Scott
A. Cottrill (incorporated by reference to Exhibit 10.1 to Form 8-K filed November 9, 2015).

10.21† Form of Restricted Stock Agreement (other than for Joseph A. Chlapaty) pursuant to 2008 Restricted
Stock Plan (incorporated by reference to Exhibit 10.4 to Form 8-K filed February 10, 2017).

10.22 Form of Non-Qualified Stock Option Agreement pursuant to 2013 Stock Option Plan (incorporated by
reference to Exhibit 10.5 to Form 8-K filed February 10, 2017).

10.23 Advanced Drainage Systems, Inc. 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit
10.1 to our Current Report on Form 8-K, File No. 001-36557, filed on September 8, 2017).

10.23A First Amendment to Advanced Drainage Systems, Inc. 2017 Omnibus Incentive Plan (incorporated by
reference to Annex A to the Registrant’s 2021 Proxy Statement (File No. 001-36557) filed with the
Securities and Exchange Commission on June 9, 2021).

10.24 Form of Restricted Stock Award Notice and Award Agreement pursuant to 2017 Omnibus Incentive
Plan (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, File No.
001-36557, filed on September 8, 2017).

10.25 Form of Notice of Grant of Stock Options and Stock Option Award Agreement pursuant to 2017
Omnibus Incentive Plan (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-
K, File No. 001-36557, filed on September 8, 2017).

10.26 Form of Director Restricted Stock Award Notice and Award Agreement pursuant to 2017 Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q, File
No. 001-36557, filed on November 6, 2017).

10.27 Form of Performance Unit Award Agreement pursuant to 2017 Omnibus Incentive Plan (incorporated
by reference to Exhibit 10.1 of Form 8-K, filed on May 30, 2018).

10.28 Confidentiality Agreement by and between the Company and Joseph A. Chlapaty (incorporated by
reference to Exhibit 10.1 to our Current Report on Form 8-K, File No. 001-36557, filed on August 17,
2017).

10.30† Executive Employment Agreement, dated as of November 10, 2016, by and between Advanced
Drainage Systems, Inc. and Kevin C. Talley (incorporated by reference to Exhibit 10.36 of Form 10-
K, filed on May 30, 2019).

10.31† Amended and Restated Employment Agreement, effective as of May 27, 2015, by and between
Infiltrator Water Technologies, LLC and Roy E. Moore, Jr. (incorporated by reference to Exhibit
10.31 of Form 10-K, filed on June 1, 2020).

10.32 Separation and Release Agreement, dated as of September 1, 2021, by and between Advanced
Drainage Systems, Inc. and Ronald R. Vitarelli (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K (File No. 001-36557) filed with the Securities and Exchange
Commission on September 8, 2021).

10.33† Advanced Drainage Systems, Inc. Employee Stock Ownership Plan, as amended May 30, 2019
(incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q (File No.
001-36557) filed with the Securities and Exchange Commission on August 1, 2019.

10.34† Executive Employment Agreement, dated as of August 17, 2018, by and between Advanced Drainage
Systems, Inc. and Darin S. Harvey.#

21.1 List of Subsidiaries. #

23.1 Consent of Deloitte & Touche LLP. #

24.1 Power of Attorney. #

49
Advanced Drainage Systems, Inc.

Exhibit
Number Description
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. #

[Link] XBRL Instance Document. #

[Link] XBRL Taxonomy Extension Schema. #

[Link] XBRL Taxonomy Extension Calculation Linkbase. #

[Link] XBRL Taxonomy Extension Definition Linkbase. #

[Link] XBRL Taxonomy Extension Label Linkbase. #

[Link] XBRL Taxonomy Extension Presentation Linkbase. #

104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

† Management contract or compensatory plan.

# Filed herewith.

Item 16. Form 10-K Summary

None.

50
Advanced Drainage Systems, Inc.

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.

Date: May 19, 2022

ADVANCED DRAINAGE SYSTEMS, INC.
By: /s/ D. Scott Barbour
Name: D. Scott Barbour
Title: President and Chief Executive Officer
(Principal Executive Officer)

By: /s/ Scott A. Cottrill

Name: Scott A. Cottrill
Title: Chief Financial Officer (Principal
Financial Officer)

By: /s/ Tim A. Makowski

Name: Tim A. Makowski
Title: Vice President, Controller and Chief
Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons in their indicated capacities, on May 19, 2022.
Signature Title

/s/ D. Scott Barbour Director, President and Chief Executive Officer

D. Scott Barbour (Principal Executive Officer)

/s/ Scott A. Cottrill Executive Vice President, Chief Financial Officer

Scott A. Cottrill and Secretary (Principal Financial Officer)

/s/ Tim A. Makowski Vice President, Controller and Chief Accounting Officer
Tim A. Makowski (Principal Accounting Officer)

/s/ C. Robert Kidder** Chairman of the Board of Directors and Director

C. Robert Kidder

/s/ Anesa T. Chaibi ** Director

Anesa T. Chaibi

/s/ Michael B. Coleman ** Director

Michael B. Coleman

/s/ Robert M. Eversole** Director

Robert M. Eversole

/s/ Alexander R. Fischer** Director

Alexander R. Fischer

/s/ Tanya Fratto** Director

Tanya Fratto

/s/ M.A. (Mark) Haney** Director

M.A. (Mark) Haney

51
Advanced Drainage Systems, Inc.

/s/ Ross M. Jones** Director

Ross M. Jones

/s/ Carl A. Nelson, Jr.** Director

Carl A. Nelson, Jr.

/s/ Manuel J. Perez de la Mesa** Director

Manuel J. Perez de la Mesa

/s/ Anil Seetharam** Director

Anil Seetharam
** The undersigned, by signing his name hereto, does hereby sign this report on behalf of each of the above-indicated directors of the registrant
pursuant to powers of attorney executed by such directors.

By: /s/ Scott A. Cottrill

Scott A. Cottrill, Attorney-in-fact

52
Advanced Drainage Systems, Inc.

TABLE OF CONTENTS

Page

Audited Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm F-1
Consolidated Balance Sheets as of March 31, 2022 and 2021 F-4
Consolidated Statements of Operations for the fiscal years ended March 31, 2022, 2021 and 2020 F-5
Consolidated Statements of Comprehensive Income (Loss) for the fiscal years ended March 31, 2022, 2021,
and 2020 F-6
Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2022, 2021, and 2020 F-7
Consolidated Statements of Stockholders’ Equity and Mezzanine Equity for the fiscal years ended March 31,
2022, 2021, and 2020 F-8
Notes to Consolidated Financial Statements F-11
Schedule II, Consolidated Valuation and Qualifying Accounts for the fiscal years ended March 31, 2022, 2021,
and 2020 F-41

53
Advanced Drainage Systems, Inc.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Advanced Drainage Systems, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Advanced Drainage Systems, Inc. and subsidiaries (the
"Company") as of March 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income
(loss), stockholders' equity and mezzanine equity, and cash flows, for each of the three years in the period ended March 31,
2022, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the
"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of March 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three
years in the period ended March 31, 2022, in conformity with accounting principles generally accepted in the United States
of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2022, based on criteria
established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission and our report dated May 19, 2022, expressed an unqualified opinion on the Company's internal
control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our
opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex
judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements,
taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the
critical audit matter or on the accounts or disclosures to which it relates.

Employee Benefit Plans - Employee Stock Ownership Plan (“ESOP”) – Refer to Note 13 to the financial statements

Critical Audit Matter Description

During the year ended March 31, 2022, the Company made a cash contribution to the ESOP of approximately $0.3 million
to satisfy the outstanding balance on the ESOP loan. The repayment of the ESOP loan resulted in the release of shares of
preferred stock from the pledge securing the ESOP Loan and the corresponding allocation of shares of preferred stock to
ESOP participants’ accounts. This resulted in the Company recording incremental compensation expense (“ESOP
acceleration”) of $30.4 million for year ended March 31, 2022.

F-1
Advanced Drainage Systems, Inc.

We identified the ESOP acceleration as a critical audit matter because of the judgment applied by management in
evaluating the accounting considerations associated with the matter. The accounting considerations included recognition of
the ESOP acceleration and determining the appropriate presentation of the ESOP acceleration in the Company’s
Consolidated Statements of Operations. Our performance of audit procedures to evaluate these conclusions required a high
degree of auditor judgment and an increased extent of audit effort, including the need to involve professionals in our firm
with expertise and experience in accounting for similar transactions.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the accounting considerations for the ESOP acceleration included the following, among
others:

• We tested the operating effectiveness of management’s internal controls over the ESOP acceleration, including
management’s controls over the evaluation of applicable accounting guidance.
• We assessed the reasonableness of management’s conclusions for the ESOP acceleration by comparing such
conclusions to the relevant accounting guidance.
• We tested the accuracy and completeness of the ESOP acceleration by evaluating the appropriateness of the key
inputs used in determining the expense.
• We involved professionals in our firm with expertise and experience in accounting for similar transactions to
assist in our evaluation of the appropriateness of management's conclusions for the ESOP acceleration.
• We evaluated the appropriateness of the Company's presentation and disclosures related to the ESOP acceleration.

/s/ Deloitte & Touche LLP

Columbus, Ohio
May 19, 2022
We have served as the Company's auditor since 2002.

F-2
Advanced Drainage Systems, Inc.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Advanced Drainage Systems, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Advanced Drainage Systems, Inc. and subsidiaries (the
“Company”) as of March 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of March 31, 2022, based on
criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements as of and for the year ended March 31, 2022, of the Company and
our report dated May 19, 2022, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Columbus, Ohio
May 19, 2022

F-3
Advanced Drainage Systems, Inc.

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
As of March 31,
(Amounts in thousands, except par value) 2022 2021
ASSETS
Current assets:
Cash $ 20,125 $ 195,009
Receivables (less allowance for credit losses of $8,198 and $5,323, respectively) 341,753 236,191
Inventories 494,324 300,961
Other current assets 15,696 10,817
Total current assets 871,898 742,978
Property, plant and equipment, net 619,383 504,275
Other assets:
Goodwill 610,293 599,072
Intangible assets, net 431,385 482,016
Other assets 116,799 85,491
Total assets $ 2,649,758 $ 2,413,832
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of debt obligations $ 19,451 $ 7,000
Current maturities of finance lease obligations 5,089 19,318
Accounts payable 224,986 171,098
Other accrued liabilities 134,877 116,151
Accrued income taxes 6,838 4,703
Total current liabilities 391,241 318,270
Long-term debt obligations (less unamortized debt issuance costs of $1,648 and $2,030,
respectively) 908,705 782,220
Long-term finance lease obligations 11,393 32,964
Deferred tax liabilities 168,435 162,185
Other liabilities 64,939 54,767
Total liabilities 1,544,713 1,350,406
Commitments and contingencies (see Note 12)
Mezzanine equity:
Redeemable convertible preferred stock: $0.01 par value; 47,070 shares authorized;
44,170 shares issued; 15,630 and 19,275 shares outstanding, respectively 195,384 240,944
Deferred compensation — unearned ESOP shares — (11,033)
Total mezzanine equity 195,384 229,911
Stockholders’ equity:
Common stock: $0.01 par value; 1,000,000 shares authorized; 75,529 and 72,071
shares issued, respectively; 72,309 and 71,570 shares outstanding, respectively 11,612 11,578
Paid-in capital 1,065,628 918,587
Common stock in treasury, at cost (318,691) (10,959)
Accumulated other comprehensive loss (24,386) (24,220)
Retained earnings (deficit) 158,876 (75,202)
Total ADS stockholders’ equity 893,039 819,784
Noncontrolling interest in subsidiaries 16,622 13,731
Total stockholders’ equity 909,661 833,515
Total liabilities, mezzanine equity and stockholders’ equity $ 2,649,758 $ 2,413,832

See accompanying notes to consolidated financial statements.

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Advanced Drainage Systems, Inc.

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal Year Ended March 31,

(Amounts in thousands, except per share data) 2022 2021 2020
Net sales $ 2,769,315 $ 1,982,780 $ 1,673,805
Cost of goods sold 1,949,750 1,292,698 1,188,716
Cost of goods sold - ESOP acceleration and special dividend
compensation 19,181 — 168,610
Gross profit 800,384 690,082 316,479
Operating expenses:
Selling, general and administrative 309,840 267,574 271,338
Selling, general and administrative - ESOP acceleration and special
dividend compensation 11,254 — 78,142
Loss on disposal of assets and costs from exit and disposal
activities 3,398 4,275 5,338
Intangible amortization 63,974 73,708 57,010
Income (loss) from operations 411,918 344,525 (95,349)
Other expense:
Interest expense 33,550 35,658 82,711
Derivative (gains) losses and other (income) expense, net (5,143) (3,404) 1,554
Income (loss) before income taxes 383,511 312,271 (179,614)
Income tax expense 110,071 86,382 14,092
Equity in net income of unconsolidated affiliates (1,586) (201) (1,909)
Net income (loss) 275,026 226,090 (191,797)
Less: net income attributable to noncontrolling interest 3,695 1,860 1,377
Net income (loss) attributable to ADS 271,331 224,230 (193,174)
Weighted average common shares outstanding:
Basic 71,276 70,155 63,820
Diluted 72,911 71,566 63,820
Net income (loss) per share available to common stockholders:
Basic $ 3.22 $ 2.64 $ (3.21)
Diluted $ 3.15 $ 2.59 $ (3.21)

See accompanying notes to consolidated financial statements.

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Advanced Drainage Systems, Inc.

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Fiscal Year Ended March 31,

(Amounts in thousands) 2022 2021 2020
Net income (loss) $ 275,026 $ 226,090 $ (191,797)
Currency translation gain (loss) 501 12,684 (12,324)
Comprehensive income (loss) 275,527 238,774 (204,121)
Less: other comprehensive gain (loss) attributable to
noncontrolling interest, net of tax 667 1,579 (2,866)
Less: net income attributable to noncontrolling interest 3,695 1,860 1,377
Total comprehensive income (loss) attributable to ADS $ 271,165 $ 235,335 $ (202,632)

See accompanying notes to consolidated financial statements.

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Advanced Drainage Systems, Inc.
ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Year Ended March 31,
(Amounts in thousands) 2022 2021 2020
Cash Flows from Operating Activities
Net income (loss) $ 275,026 $ 226,090 $ (191,797)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 141,808 145,586 124,940
Deferred income taxes 2,175 (13,477) (2,924)
Loss on disposal of assets and costs from exit and disposal activities 3,398 4,275 5,338
ESOP and stock-based compensation 77,559 65,434 32,395
ESOP acceleration and special dividend compensation 30,435 — 246,752
Amortization of deferred financing charges 382 382 34,476
Inventory step up related to Infiltrator acquisition — — 7,880
Fair market value adjustments to derivatives (1,392) (3,355) 3,128
Equity in net income of unconsolidated affiliates (1,586) (201) (1,909)
Other operating activities (11,679) 6,770 (6,005)
Changes in working capital:
Receivables (96,990) (34,760) 5,170
Inventories (189,715) (14,561) 19,086
Prepaid expenses and other current assets (4,642) (1,208) (1,929)
Accounts payable, accrued expenses and other liabilities 50,109 71,241 31,588
Net cash provided by operating activities 274,888 452,216 306,189
Cash Flows from Investing Activities
Capital expenditures (149,083) (78,757) (67,677)
Acquisition, net of cash acquired (49,309) — (1,089,322)
Other investing activities (441) 883 6,529
Net cash used in investing activities (198,833) (77,874) (1,150,470)
Cash Flows from Financing Activities
Proceeds from Term Loan Facility — — 1,300,000
Payments on Term Loan Facility — — (1,300,000)
Proceeds from syndication of Term Loan Facility — — 700,000
Payments on syndicated Term Loan Facility (7,000) (207,000) (51,750)
Proceeds from Senior Notes — — 350,000
Proceeds from Revolving Credit Agreement 332,200 — 277,900
Payments on Revolving Credit Agreement (217,900) (100,000) (177,900)
Debt issuance costs — — (34,606)
Proceeds from PNC Credit Agreement — — 253,900
Payments on PNC Credit Agreement — — (388,300)
Payments on Prudential Senior Notes — — (100,000)
Proceeds from Equipment Financing 35,963 — —
Payments on Equipment Financing (4,715) — —
Payments on finance lease obligations (50,447) (21,491) (27,119)
Proceeds from common stock offering, net of offering costs — — 293,648
Repurchase of common stock (292,000) — —
Cash dividends paid (38,494) (32,155) (92,127)
Proceeds from option exercises 4,574 7,553 8,163
Payment of withholding taxes on vesting of restricted stock units (13,063) — —
Other financing activities (186) (1,490) (237)
Net cash (used in) provided by financing activities (251,068) (354,583) 1,011,572
Effect of exchange rate changes on cash 129 1,017 (1,949)
Net change in cash (174,884) 20,776 165,342
Cash at beginning of year 195,009 174,233 8,891
Cash at end of year $ 20,125 $ 195,009 $ 174,233
See accompanying notes to consolidated financial statement.

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Advanced Drainage Systems, Inc.

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY

Accumulated Non-
Common Stock Other Total ADS
Retained controlling Total
Common Stock in Treasury Comprehensive Stockholders’
Paid-in Earnings Interest in Stockholders'
(Amounts in thousands) Shares Amount Capital Shares Amount Loss (Deficit) Equity Subsidiaries Equity
Balance April 1, 2019 57,964 $ 11,436 $ 391,039 474 $ (9,863) $ (25,867) $ 17,582 $ 384,327 $ 13,986 $ 398,313
Net (loss) income — — — — — — (193,174) (193,174) 1,377 (191,797)
Other comprehensive loss — — — — — (9,458) — (9,458) (2,866) (12,324)
Redeemable convertible preferred stock dividends — — — — — — (10,847) (10,847) — (10,847)
Common stock dividend ($1.36 per share) — — — — — — (80,821) (80,821) — (80,821)
Dividend paid to noncontrolling interest holder — — — — — — — — (735) (735)
Allocation of ESOP shares to participants for:
Compensation — — 8,164 — — — — 8,164 — 8,164
Dividend — — — — — — (359) (359) — (359)
Special Dividend — — 101,189 — — — — 101,189 — 101,189
Exercise of common stock options 571 6 8,163 7 (207) — — 7,962 — 7,962
Restricted stock awards 118 1 — 10 (391) — — (390) — (390)
Stock-based compensation — — 12,269 — — — — 12,269 — 12,269
ESOP distributions in common stock 807 8 13,101 — — — — 13,109 — 13,109
Common stock offering 10,350 104 293,544 — — — — 293,648 — 293,648
Other — — 104 — — — — 104 — 104
Balance March 31, 2020 69,810 $ 11,555 $ 827,573 491 $ (10,461) $ (35,325) $ (267,619) $ 525,723 $ 11,762 $ 537,485

Deferred
Redeemable Compensation –
Convertible Unearned ESOP Total
Preferred Stock Shares Mezzanine
(Amounts in thousands) Shares Amount Shares Amount Equity
Balance April 1, 2019 22,611 $ 282,638 14,452 $ (180,316) $ 102,322
Allocation of ESOP shares to participants for:
Compensation — — (957) 11,962 11,962
Dividend — — — 359 359
Special Dividend — — (11,645) 145,563 145,563
ESOP distributions in common stock (1,049) (13,109) — — (13,109)
Balance March 31, 2020 21,562 $ 269,529 1,850 $ (22,432) $ 247,097

See accompanying notes to consolidated financial statements.

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ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY

Accumulated Non-
Common Stock Other Total ADS
Retained controlling Total
Common Stock in Treasury Comprehensive Stockholders’
Paid-in Earnings Interest in Stockholders'
(Amounts in thousands) Shares Amount Capital Shares Amount Loss (Deficit) Equity Subsidiaries Equity
Balance April 1, 2020 69,810 $ 11,555 $ 827,573 491 $ (10,461) $ (35,325) $ (267,619) $ 525,723 $ 11,762 $ 537,485
Adoption of ASU 2016-13 — — — — — — (779) (779) — (779)
Net income — — — — — — 224,230 224,230 1,860 226,090
Other comprehensive income — — — — — 11,105 — 11,105 1,579 12,684
Redeemable convertible preferred stock dividends — — — — — — (5,242) (5,242) — (5,242)
Common stock dividend ($0.36 per share) — — — — — — (25,443) (25,443) — (25,443)
Dividend paid to noncontrolling interest holder — — — — — — — — (1,470) (1,470)
Allocation of ESOP shares to participants for:
Compensation — — 33,931 — — — — 33,931 — 33,931
Dividend — — — — — — (349) (349) — (349)
Exercise of common stock options 368 4 7,553 — — — — 7,557 — 7,557
Restricted stock awards 134 1 — 10 (498) — — (497) — (497)
Stock-based compensation — — 20,453 — — — — 20,453 — 20,453
ESOP distributions in common stock 1,759 18 28,567 — — — — 28,585 — 28,585
Other — — 510 — — — — 510 — 510
Balance March 31, 2021 72,071 $ 11,578 $ 918,587 501 $ (10,959) $ (24,220) $ (75,202) $ 819,784 $ 13,731 $ 833,515

Deferred
Redeemable Compensation –
Convertible Unearned ESOP Total
Preferred Stock Shares Mezzanine
(Amounts in thousands) Shares Amount Shares Amount Equity
Balance April 1, 2020 21,562 $ 269,529 1,850 $ (22,432) $ 247,097
Allocation of ESOP shares to participants for:
Compensation — — (884) 11,050 11,050
Dividend — — — 349 349
ESOP distributions in common stock (2,287) (28,585) — — (28,585)
Balance March 31, 2021 19,275 $ 240,944 966 $ (11,033) $ 229,911

See accompanying notes to consolidated financial statements.

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Advanced Drainage Systems, Inc.

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY

Accumulated Non-
Common Stock Other Total ADS
Retained controlling Total
Common Stock in Treasury Comprehensive Stockholders’
Paid-in Earnings Interest in Stockholders’
(Amounts in thousands) Shares Amount Capital Shares Amount Loss (Deficit) Equity Subsidiaries Equity
Balance April 1, 2021 72,071 $ 11,578 $ 918,587 501 $ (10,959) $ (24,220) $ (75,202) $ 819,784 $ 13,731 $ 833,515
Net income — — — — — — 271,331 271,331 3,695 275,026
Other comprehensive (loss) income — — — — — (166) — (166) 667 501
Redeemable convertible preferred stock dividends — — — — — — (5,646) (5,646) — (5,646)
Common stock dividend ($0.44 per share) — — — — — — (31,496) (31,496) — (31,496)
Dividend paid to noncontrolling interest holder — — — — — — — — (1,471) (1,471)
Share repurchases — — — 2,574 (292,000) — — (292,000) — (292,000)
Allocation of ESOP shares to participants for:
Compensation — — 46,888 — — — — 46,888 — 46,888
Dividend — — — — — — (294) (294) — (294)
ESOP acceleration — — 26,209 — — — — 26,209 — 26,209
Exercise of common stock options 206 2 4,572 — — — — 4,574 — 4,574
Restricted stock awards 203 2 — 53 (5,987) — — (5,985) — (5,985)
Performance-based restricted stock units 245 2 — 92 (9,745) (9,743) (9,743)
Stock-based compensation — — 24,158 — — — — 24,158 — 24,158
ESOP distributions in common stock 2,804 28 45,532 — — — — 45,560 — 45,560
Other — — (318) — — — 183 (135) — (135)
Balance March 31, 2022 75,529 $ 11,612 $ 1,065,628 3,220 $ (318,691) $ (24,386) $ 158,876 $ 893,039 $ 16,622 $ 909,661

Deferred
Redeemable Compensation –
Convertible Unearned ESOP Total
Preferred Stock Shares Mezzanine
(Amounts in thousands) Shares Amount Shares Amount Equity
Balance April 1, 2021 19,275 $ 240,944 966 $ (11,033) $ 229,911
Allocation of ESOP shares to participants for:
Compensation — — (628) 6,513 6,513
Dividend — — — 294 294
ESOP acceleration — — (338) 4,226 4,226
ESOP distributions in common stock (3,645) (45,560) — — (45,560)
Balance March 31, 2022 15,630 $ 195,384 — $ — $ 195,384

See accompanying notes to consolidated financial statements.

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Advanced Drainage Systems, Inc.

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business - Advanced Drainage Systems, Inc. and subsidiaries (collectively referred to as “ADS” or
the “Company”), incorporated in Delaware, designs, manufactures and markets innovative water management
solutions in the stormwater and onsite septic waste water 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’s fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, references to “year”
pertain to the fiscal year. For example, 2022 refers to fiscal 2022, which is the period from April 1, 2021 to
March 31, 2022.

The Company is managed and reports results of operations in three reportable segments: Pipe, Infiltrator and
International. The Company also reports the results of its Allied Products and all other business segments as Allied
Products & Other.

Principles of Consolidation - The 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 Consolidated Balance Sheets and the related equity in earnings from these investments are included in Equity
in net income of unconsolidated affiliates in the Consolidated Statements of Operations. All intercompany balances
and transactions have been eliminated in consolidation.

Presentation - Certain prior year captions have been renamed to conform to the fiscal 2022 presentation. Cost of
goods sold - ESOP acceleration and special dividend compensation and Selling, general and administrative - ESOP
acceleration and special dividend compensation include the compensation expense triggered by the acceleration of
the ESOP in fiscal 2022 discussed in “Note 13. Employee Benefit Plans” and the special dividend in fiscal 2020
discussed in “Note 16. Net Income Per Share and Stockholders’ Equity.”

Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of contingencies and liabilities at the balance sheet
date and the reported amounts of revenues and expenses during the reporting period. Significant estimates include,
but are not limited to, the allowance for credit losses, valuation of inventory, useful lives of property, plant and
equipment and amortizing intangible assets, determination of the proper accounting for leases, valuation of equity
method investments, goodwill, intangible assets and other long-lived assets for impairment, accounting for stock-
based compensation and the ESOP, valuation of the redeemable convertible preferred stock, determination of
allowances for sales returns, rebates and discounts, determination of the valuation allowance, if any, on deferred tax
assets, and reserves for uncertain tax positions. Management’s estimates and assumptions are evaluated on an
ongoing basis and are based on historical experience, current conditions and available information. Management
believes the accounting estimates are appropriate and reasonably determined; however, due to the inherent
uncertainties in making these estimates, actual results could differ from those estimates.

Receivables and Allowance for Credit Losses - Receivables include trade receivables, net of an allowance for credit
losses, and other miscellaneous receivables. Receivables at March 31, 2022 and 2021 are as follows:

(Amounts in thousands) 2022 2021

Trade receivables, net $ 339,585 $ 233,753
Other miscellaneous receivables 2,168 2,438
Receivables, net $ 341,753 $ 236,191

The Company extends credit to customers based on an evaluation of their financial condition and collateral is
generally not required. The Company records an allowance for credit losses at the time accounts receivable are

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Advanced Drainage Systems, Inc.

recorded based on the Company’s historical write-off activity, an evaluation of the current economic environment
and the Company’s expectations of future economic conditions.

Inventories - Inventories are stated at the lower of cost or net realizable value. The Company’s inventories are
maintained on the first-in, first-out (“FIFO”) method. Costs include the cost of acquiring materials, including in-
bound freight from vendors and freight incurred for the transportation of raw materials, tooling or finished goods
between the Company’s manufacturing plants and its distribution centers, direct and indirect labor, factory overhead
and certain corporate overhead costs related to the production of inventory.

Property, Plant and Equipment and Depreciation Method - Property, plant and equipment are recorded at cost less
accumulated depreciation, with the exception of assets acquired through acquisitions, which are initially recorded at
fair value. Equipment acquired under finance lease is recorded at the present value of the future minimum lease
payments. Depreciation is computed for financial reporting purposes using the straight-line method over the
estimated useful lives of the related assets or the lease term, if shorter, as follows:

Years
Buildings and leasehold improvements 20 to 45 or the lease term if shorter
Machinery and production equipment 3 to 18
Transportation equipment 3 to 12

Costs of additions and major improvements are capitalized, whereas maintenance and repairs that do not improve or
extend the life of the asset are charged to expense as incurred. When assets are retired or disposed, the cost and
related accumulated depreciation are removed from the asset accounts and any resulting gain or loss is reflected in
Loss on disposal of assets and costs from exit and disposal activities in the Consolidated Statements of Operations.
Construction in progress is also recorded at cost and includes capitalized interest, capitalized payroll costs and related
costs such as taxes and other fringe benefits.

Goodwill - The Company records acquisitions resulting in the consolidation of an enterprise using the acquisition
method of accounting. Under this method, the Company records the assets acquired, including intangible assets that
can be identified, and liabilities assumed based on their estimated fair values at the date of acquisition. The purchase
price in excess of the fair value of the identifiable assets acquired and liabilities assumed is recorded as goodwill.

Goodwill is reviewed annually for impairment as of March 31 or whenever events or changes in circumstances
indicate the carrying value may be greater than fair value. If the fair value of the reporting unit exceeds the carrying
value of the net assets assigned to that unit, goodwill is not considered impaired and the Company is not required to
perform further testing. If the carrying value of a reporting unit’s goodwill exceeds its fair value, then the Company
would record an impairment loss equal to the difference. With respect to this testing, a reporting unit is a component
of the Company for which discrete financial information is available and regularly reviewed by management. The fair
value of each reporting unit is determined by considering both the income and market approach. Determining the fair
value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These
estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash
flows, risk-adjusted discount rates, future economic and market conditions, and determination of appropriate market
comparison. The fair value estimates are based on assumptions management believes to be reasonable but are
inherently uncertain. For the fiscal year ended March 31, 2021, the Company completed a quantitative assessment of
the Infiltrator and Canada reporting units and determined no impairment charges were required. For the fiscal year
ended March 31, 2020, the Company completed a quantitative fair value assessment for all reporting units and
determined no impairment charges were required.

GAAP allows entities testing goodwill for impairment the option of performing a qualitative assessment before
calculating the fair value of a reporting unit for the goodwill impairment test. If the qualitative assessment is
performed, an entity is no longer required to calculate the fair value of a reporting unit unless the entity determines
that, based on that assessment, it is more likely than not that the fair value is less than its carrying amount. The
Company applied the qualitative assessment to all reporting units as of March 31, 2022. For all reporting units,
except Infiltrator and Canada, the Company completed a qualitative assessment as of March 31, 2021. The qualitative
assessments indicated that no impairment charges were required for goodwill.

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Advanced Drainage Systems, Inc.

Intangible Assets

Intangible Assets — Definite-Lived - Definite-lived intangible assets are amortized using the straight-line method or
an accelerated method over their estimated useful lives and are tested for recoverability whenever events or changes
in circumstances indicate that carrying amounts of the asset group may not be recoverable. Asset groups are
established primarily by determining the lowest level of cash flows available. If the estimated undiscounted future
cash flows are less than the carrying amounts of such assets, an impairment loss is recognized to the extent the fair
value of the asset less any costs of disposition is less than the carrying amount of the asset. Determining the fair value
of these assets is judgmental in nature and involves the use of significant estimates and assumptions.

Intangible Assets — Indefinite-Lived - Indefinite-lived intangible assets are tested for impairment annually as of
March 31 or whenever events or changes in circumstances indicate the carrying value may be greater than fair value.
Determining the fair value of these assets is judgmental in nature and involves the use of significant estimates and
assumptions. The Company bases its fair value estimates on assumptions it believes to be reasonable, but that are
inherently uncertain. To estimate the fair value of these indefinite-lived intangible assets, the Company uses an
income approach, which utilizes a market derived rate of return to discount anticipated performance. An impairment
loss is recognized when the estimated fair value of the intangible asset is less than the carrying value.

ADS completed a quantitative fair value measurement of indefinite-lived trademarks as of March 31, 2020. The test
indicated that the fair value of the indefinite-lived trademarks substantially exceeded the carrying value, indicating
that no impairment existed.

GAAP allows entities testing indefinite-lived intangible assets for impairment the option of performing a qualitative
assessment before calculating the fair value of the indefinite-lived intangible assets for the impairment test. If the
qualitative assessment is performed, an entity is no longer required to calculate the fair value of an indefinite-lived
intangible assets unless the entity determines that, based on that assessment, it is more likely than not that its fair
value is less than its carrying amount. ADS applied the qualitative assessment to specific trademarks for the annual
impairment tests performed as of March 31, 2022 and 2021. For the qualitative tests, ADS assessed various
assumptions, events and circumstances that would have affected the estimated fair value of the reporting unit as
compared to its latest quantitative fair value measurement. The results of these assessments indicated that it is not
more likely than not that the trademarks fair value is less than the reporting unit carrying value. The Company did not
incur any impairment charges for Intangible assets.

Other Assets - Other assets include operating lease right of use assets, investments in unconsolidated affiliates
accounted for under the equity method, capitalized software development costs, including cloud computing costs,
deposits, central parts, and other miscellaneous assets. See “Note 5. Leases” for further information on the operating
lease right of use assets. The Company capitalizes development costs for internal use software and defers
implementation costs for hosting arrangements. Capitalization of software development costs and deferral of
implementation costs for hosting arrangements begin in the application development stage and end when the asset is
placed into service. The Company amortizes such costs using the straight-line method over estimated useful lives of 2
to 10 years, which is included in Selling, general and administrative expenses or Cost of goods sold within the
Consolidated Statements of Operations depending on the nature of the asset and its intended use. Central parts
represent spare production equipment items which are used to replace worn or broken production equipment parts
and help reduce the risk of prolonged equipment outages. The cost of central parts is amortized on a straight-line
basis over estimated useful lives of 3 to 10 years.

The Company evaluates its investments in unconsolidated affiliates for impairment whenever events or changes in
circumstances indicate that the carrying amount might not be recoverable and recognizes an impairment loss when a
decline in value below carrying value is determined to be other-than-temporary. Under these circumstances, the
Company would adjust the investment down to its estimated fair value, which then becomes its new carrying value.

Leases - The Company determines whether an arrangement contains a lease at inception by determining if the
contract conveys the right to control the use of identified plant, property, and equipment for a period of time in
exchange for consideration and other facts and circumstances as defined by Accounting Standards Codification 842,
Leases (“ASC 842”). For each lease which has an accounting lease term of greater than 12 months, the Company
records the right-of-use asset and lease liability on the balance sheet. The accounting lease term includes cancellable
and renewal periods which are reasonably assured. The lease liability is measured utilizing the incremental borrowing
rate unless the Company can specifically determine the rate implicit in the lease. Leases are evaluated for appropriate
classification as operating or financing at lease inception. For leases classified as finance leases at lease inception, the

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Advanced Drainage Systems, Inc.

Company records a finance lease asset and lease financing obligation equal to the present value of the minimum lease
payments. The finance lease right of use asset is recorded in Property, plant and equipment, net and amortized to its
expected residual value at the end of the lease term using the straight-line method, and the lease financing obligation
is amortized using the effective interest method over the lease term with the rental payments being allocated to
principal and interest. For leases classified as operating leases, the Company records the operating lease right of use
asset in Other assets and operating lease obligation in Other accrued liabilities and Other liabilities. Operating lease
rent expense is recognized over the useful life using the straight-line method.

Foreign Currency Translation - Assets and liabilities of foreign subsidiaries with a functional currency other than
the U.S. dollar are translated into U.S. dollars at the current rate of exchange on the last day of the reporting period.
Revenues and expenses are translated at a monthly average exchange rate and equity transactions are translated using
either the actual exchange rate on the day of the transaction or a monthly average historical exchange rate. For the
fiscal years ended March 31, 2022 and 2021, the Company’s Accumulated other comprehensive loss (“AOCL”)
consisted of foreign currency translation gains and losses.

Net Sales - 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.

Shipping Costs - The Company incurs shipping costs to deliver products to customers using an in-house fleet or
common carrier. Typically shipping costs are prepaid and included in the product price; however, in some instances,
the Company bills shipping costs to customers. Shipping costs are also incurred to physically move raw materials,
tooling and products between manufacturing and distribution facilities. Shipping costs to deliver products to
customers for the fiscal years ended March 31, 2022, 2021, and 2020 were $242.0 million, $174.2 million, and
$149.0 million, respectively, and are included in Cost of goods sold.

Stock-Based Compensation - See “Note 14. Stock-Based Compensation” for information about the stock-based
compensation award programs and related accounting policies.

Advertising - The Company expenses advertising costs as incurred. Advertising costs are recorded in Selling, general
and administrative expenses in the Consolidated Statements of Operations. The total advertising costs were $6.0
million, $4.1 million, and $4.9 million for the fiscal years ended March 31, 2022, 2021, and 2020, respectively.

Self-Insurance - The Company is self-insured for short-term disability and medical coverage it provides for
substantially all eligible employees. The Company is self-insured for medical claims up to the individual and
aggregate stop-loss coverage limits. The Company accrues for claims incurred but not reported based on an estimate
of future claims related to events that occurred prior to the fiscal year end if it has not met the aggregate stop-loss
coverage limit. Amounts expensed totaled $45.6 million, $42.4 million, and $50.3 million for the fiscal years ended
March 31, 2022, 2021, and 2020, respectively, of which employees contributed $10.7 million, $8.5 million, and $7.9
million, respectively.

ADS is also self-insured for various other general insurance programs to the extent of the applicable deductible limits
on the Company’s insurance coverage. These programs include primarily automobile, general liability, cybersecurity
and employment practices coverage with a deductible of $0.5 million per occurrence for general liability and $0.8
million per occurrence for automobile or claim incurred. Amounts expensed during the period, including an estimate
for claims incurred but not reported at year end, were $3.2 million, $1.7 million, and $2.5 million, for the years ended
March 31, 2022, 2021, and 2020, respectively.

ADS is also self-insured for workers’ compensation insurance with stop-loss coverage for claims that exceed $0.3
million per incident up to the respective state statutory limits. Amounts expensed, including an estimate for claims
incurred but not reported, were $4.1 million, $3.0 million, and $3.0 million for the fiscal years ended March 31, 2022,
2021, and 2020, respectively.

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Advanced Drainage Systems, Inc.

Income Taxes - Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized and represent the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. They are measured using
the enacted tax rates expected to apply to taxable income in the years in which the related temporary differences are
expected to be recovered or settled. Valuation allowances are established against deferred tax assets when it is more
likely than not that the realization of those deferred tax assets will not occur. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The deferred
income tax provision represents the change during the reporting period in the deferred tax assets and deferred tax
liabilities. Penalties and interest recorded on income taxes payable are recorded as part of Income tax expense.

The Company determines whether an uncertain tax position is more likely than not to be sustained upon examination,
including resolution of any related appeals or litigation process, based upon the technical merits of the position. For
tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is the
largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with
the relevant taxing authority.

Fair Values - The fair value framework requires the categorization of assets and liabilities into three levels based
upon assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair
value, whereas Level 3 generally requires significant management judgment. ADS’s policy for determining when
transfers between levels have occurred is to use the actual date of the event or change in circumstances that caused
the transfer.

Concentrations of Risk - The Company has a large, active customer base of approximately 17,000 customers with
two customers, Ferguson Enterprises and Core and Main, each representing more than 10% of annual net sales. Such
customers accounted for 24.2%, 22.8%, and 24.3% of fiscal 2022, 2021 and 2020 net sales, respectively. The
Company’s customer base is diversified across the range of end markets that it serves.

Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of
Receivables. The Company provides its products to customers based on an evaluation of the customers’ financial
condition, generally without requiring collateral. Exposure to losses on Receivables is principally dependent on each
customer’s financial condition. The Company performs ongoing credit evaluations of its customers. The Company
monitors the exposure for credit losses and maintains allowances for anticipated losses. Concentrations of credit risk
with respect to Receivables are limited due to the large number of customers comprising the Company’s customer
base and their dispersion across many different geographies. One customer, Ferguson Enterprises, accounted for
approximately 16.4% and 18.1% of Receivables at March 31, 2022 and 2021, respectively.

Derivatives - The Company recognizes derivative instruments as either assets or liabilities and measure those
instruments at fair value. ADS uses interest rate swaps, commodity options in the form of collars and swaps, and
foreign currency forward contracts to manage various exposures to interest rate, commodity price, and exchange rate
fluctuations. These instruments do not qualify for hedge accounting treatment. Interest rate swap gains and losses
resulting from the difference between the spot rate and applicable base rate is recorded in the Consolidated
Statements of Operations in Interest expense. For commodity options in the form of collars and swaps, and foreign
currency forward contracts, gains and losses from contract settlements and changes in fair value of the derivative
instruments are recognized in Derivative (gains) losses and other (income) expense, net in the Consolidated
Statements of Operations. The Company’s policy is to present all derivative balances on a gross basis.

Recent Accounting Pronouncements

Recently Adopted Accounting Guidance

Simplifying the Accounting for Income Taxes - In December 2019, the Finance Accounting Standards Board
(“FASB”) issued an ASU to simplify the accounting for income taxes by removing certain exceptions to the general
principles in ASC 740, Income Taxes and improve the comparability of financial statements. The amendments in this
ASU are effective for fiscal years beginning after December 15, 2020, and early adoption is permitted. The Company
adopted this standard effective April 1, 2021. The Company’s adoption of the standard had no impact on the
Company’s Consolidated Financial Statements.

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Advanced Drainage Systems, Inc.

Recent Accounting Guidance Not Yet Adopted

Reference Rate Reform - In March 2020, the FASB issued an ASU that provides optional expedients and exceptions
related to financial reporting impacts related to the expected market transition from LIBOR to another reference rates.
The amendments are effective on March 12, 2020 and an entity may elect to adopt prospectively through December
31, 2022. 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 2021 Form 10-K that have significance, or potential significance, to the
Consolidated Financial Statements.

2. REVENUE RECOGNITION

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 Consolidated Statements of Operations net of allowances for returns, rebates,
discounts, and taxes collected concurrently with revenue-producing activities.

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 18. Business Segments Information" for the Company’s disaggregation of Net sales by reportable
segment.

Significant Judgments - 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 obligations 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.

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 March 31, 2022 and 2021:

March 31, March 31,

2022 2021
(In thousands)
Contract asset - product returns $ 978 $ 694
Refund liability 2,356 1,801

Practical Expedients and Exemptions - The Company expenses incremental costs to obtain a contract (e.g. sales
commissions) when incurred as the amortization period would have been one year or less. These costs are recorded
within Selling, general and administrative expenses on the Consolidated Statements of Operations.

The Company elected 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 of the goods.

The Company elected 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.

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Advanced Drainage Systems, Inc.

Further, the Company does not disclose the value of unsatisfied performance obligations for contracts with an
original expected length of one year or less.

3. ACQUISITIONS

Fiscal 2022 Acquisition of Jet - On December 3, 2021, the Company completed its acquisition of Jet Polymer
Recycling, Inc., The Traylor Group, Inc. and certain assets of EAT Properties, L.L.C. (collectively “Jet”). Jet was a
privately-owned recycling company located in the southeastern United States. The acquisition of Jet expands the
Company's plastic recycling capabilities to support future growth. Jet is currently the largest supplier of recycled
polypropylene plastic for Infiltrator. Jet is included in the Pipe reporting segment. The total fair value of
consideration transferred was $49.5 million.

The following table summarizes the consideration transferred and the preliminary purchase price allocation of assets
acquired and liabilities assumed. 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 finalization 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 continues to finalize the valuations of assets acquired
and liabilities assumed.

Adjustments to
Property, plant
and equipment
Increase to and Intangible Tax Updated
(Amounts in thousands) Initial Amount Purchase Price assets Adjustments Amount
Cash $ 160 $ — $ — $ — $ 160
Total current assets, excluding cash 12,993 — — — 12,993
Property, plant and equipment 22,495 — 512 — 23,007
Goodwill 12,597 99 (2,212) 650 11,134
Intangible assets 11,500 — 1,700 — 13,200
Other assets 158 — — — 158
Total current liabilities (5,750) — — — (5,750)
Deferred tax liabilities (2,999) — — (650) (3,649)
Other liabilities (1,784) — — — (1,784)
Total fair value of consideration transferred $ 49,370 $ 99 $ — $ — $ 49,469

The preliminary goodwill of $11.1 million represents the excess of consideration transferred over the preliminary fair
value of assets acquired and liabilities assumed and is attributable to expected operating efficiencies. The goodwill is
not deductible for income tax purposes and is assigned to the Pipe segment.

The preliminary purchase price excludes transaction costs. The Company incurred $2.6 million of transaction costs
related to the acquisition such as legal, accounting, valuation and other professional services during the fiscal year
ended March 31, 2022. These costs are included in Selling, general and administrative expenses in the Consolidated
Statements of Operations and Consolidated Statements of Comprehensive Income.

The identifiable intangible assets recorded in connection with the closing of the acquisition of Jet are based on
preliminary valuations including supplier and customer relationships, tradename and non-compete agreements
totaling $13.2 million.

Preliminary fair
(Amounts in thousands) value
Supplier and customer relationships $ 11,300
Other 1,900
Total identifiable intangible assets $ 13,200

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Advanced Drainage Systems, Inc.

The Company has excluded certain disclosures required under ASC 805, Business Combinations as they are not
material to the financial statements.

Fiscal 2020 Acquisition of Infiltrator - On July 31, 2019 (the “Closing Date”), the Company completed its
Acquisition of Infiltrator pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated July 31,
2019. Infiltrator manufactures and sells wastewater systems for homes and provides drainage chambers for septic and
storm water management. The total fair value of consideration transferred was $1,147.2 million. The Merger
Agreement was funded through a bridge loan facility. The results of operations of Infiltrator are included in the
Consolidated Statements of Operations after July 31, 2019.

The net sales to external customers of Infiltrator since the acquisition are included in the Consolidated Statements of
Operations for the fiscal year ended March 31, 2020 was $169.3 million. The income before taxes of Infiltrator since
the acquisition are included in the Consolidated Statements of Operations for the fiscal year ended March 31, 2020
was $8.2 million.

The unaudited pro forma information for the fiscal years ended March 31, 2020 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 Infiltrator and the estimated
tax impacts thereof. The unaudited pro forma information does not reflect any operating efficiency or potential cost
savings that could result from the consolidation of Infiltrator. Accordingly, the unaudited pro forma information is
presented for informational purposes only and is not necessarily indicative of the actual results of the combined
company if the Acquisition had occurred at the beginning of the period presented, nor is it indicative of the future
results of operations.

(Amounts in thousands) 2020

Net sales $ 1,760,208
Net income (loss) attributable to ADS (145,244)

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net as of the fiscal years ended March 31 consisted of the following:

(Amounts in thousands) 2022 2021

Land, buildings and improvements $ 308,942 $ 263,191
Machinery and production equipment 756,482 646,592
Transportation equipment 97,016 210,738
Construction in progress 80,928 71,873
Total cost 1,243,368 1,192,394
Less: accumulated depreciation (623,985) (688,119)
Property, plant and equipment, net $ 619,383 $ 504,275

The following table sets forth depreciation expense related to Property, plant and equipment in each of the fiscal
years ended March 31:

(Amounts in thousands) 2022 2021 2020

Depreciation expense (inclusive of leased assets depreciation) $ 73,514 $ 68,034 $ 64,642

5. 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 30
years. A portion of the Company’s real estate leases include an option to extend the leases for up to 5 years. The

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Advanced Drainage Systems, Inc.

Company has included renewal options which are reasonably certain to be exercised in its right-of-use assets and
lease liabilities. The Company’s lease payments are generally fixed.

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 lease is determined based on the Company’s credit rating, adjusted for the impacts of
collateral, and the lease term.

Lease Cost - The components of lease cost for the years ended March 31, 2022, 2021, and 2020 were:

(Amounts in thousands) Income Statement Classification 2022 2021 2020

Operating lease cost
Operating lease cost Cost of goods sold $ 12,663 $ 8,391 $ 5,548
Operating lease cost Selling, general and administrative 1,335 1,593 1,204
Short-term lease cost Cost of goods sold 4,813 3,963 2,393
Total operating lease cost $ 18,811 $ 13,947 $ 9,145
Finance lease cost
Amortization of right-of-use assets Cost of goods sold 12,986 16,442 17,059
Amortization of right-of-use assets Selling, general and administrative 1,413 1,433 2,543
Interest on lease liabilities Interest expense 1,679 2,436 4,344
Total finance lease cost $ 16,078 $ 20,311 $ 23,946

Supplemental cash flow information related to leases for the periods presented were as follows:

(Amounts in thousands) 2022 2021 2020

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases $ 13,998 $ 9,984 $ 6,572
Operating cash flows used for finance leases 1,932 3,205 4,675
Financing cash flows used for finance leases 50,447 21,491 27,119
Right-of-use assets obtained in exchange for lease obligations:
Operating leases 38,093 15,173 10,529
Finance leases 17,695 9,907 5,078

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Advanced Drainage Systems, Inc.

Supplemental balance sheet information related to leases as of the periods presented were as follows:

(Amounts in thousands) Balance Sheet Classification 2022 2021

Operating leases
Right-of-use assets Other assets $ 54,583 $ 31,237
Operating lease liabilities:
Current lease liabilities Other accrued liabilities 14,203 8,995
Non-current lease liabilities Other liabilities 41,032 22,393
Total operating lease liabilities $ 55,235 $ 31,388
Finance leases
Right-of-use assets Property, plant and equipment 15,420 80,904
Finance lease liabilities:
Current maturities of finance lease
Current lease liabilities obligations 5,089 19,318
Non-current lease liabilities Long-term finance lease obligations 11,393 32,964
Total finance lease liabilities $ 16,482 $ 52,282

Weighted average lease term (in years):

Operating leases 6.00 6.46
Finance leases 4.23 9.39
Weighted average discount rate:
Operating leases 3.54 % 3.75 %
Finance leases 3.52 % 4.90 %

The following is a schedule by year of future minimum lease payments on a rolling twelve-month basis under
operating and finance leases and the present value of the net minimum lease payments as of March 31, 2022:

(Amounts in thousands) Operating Leases Finance Leases

Year 1 $ 15,448 $ 5,217
Year 2 12,523 4,379
Year 3 10,476 2,940
Year 4 7,577 1,889
Year 5 4,095 1,511
Thereafter 11,702 1,364
Total minimum lease payments $ 61,821 $ 17,300
Less: amount representing interest 6,586 818
Present value of net minimum lease payments $ 55,235 $ 16,482

6. INVENTORIES

Inventories as of the fiscal years ended March 31 consisted of the following:

(Amounts in thousands) 2022 2021

Raw materials $ 156,050 $ 75,294
Finished goods 338,274 225,667
Total Inventories $ 494,324 $ 300,961

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Advanced Drainage Systems, Inc.

During fiscal years ended March 31, 2022 and 2021, the Company incurred production-related general and
administrative costs included in the cost of finished goods inventory of $57.1 million and $40.1 million, respectively,
of which $12.1 million and $7.9 million remained in inventory at March 31, 2022 and 2021, respectively.

7. GOODWILL AND INTANGIBLE ASSETS

Goodwill - The carrying amount of goodwill by reportable segment is as follows:

Allied Products
(Amounts in thousands) Pipe Infiltrator International & Other Total
Balance at March 31, 2020 $ 57,663 $ 495,841 $ 9,873 $ 34,442 $ 597,819
Currency translation — — 1,253 — 1,253
Balance at March 31, 2021 57,663 495,841 11,126 34,442 599,072
Acquisition 11,134 — — — 11,134
Currency translation — — 87 — 87
Balance at March 31, 2022 $ 68,797 $ 495,841 $ 11,213 $ 34,442 $ 610,293

Intangible Assets – Intangible assets as of March 31, 2022 and 2021 consisted of the following:

2022 2021
Gross Accumulated Net Gross Accumulated Net
(Amounts in thousands) Intangible Amortization Intangible Intangible Amortization Intangible
Definite-lived intangible assets
Developed technology $ 176,068 $ (64,751) $ 111,317 $ 177,579 $ (49,842) $ 127,737
Supplier and customer relationships 389,125 (140,830) 248,295 377,742 (97,115) 280,627
Patents and non-compete agreements 9,594 (6,837) 2,757 8,985 (6,884) 2,101
Trademarks and tradenames 65,960 (8,808) 57,152 69,878 (10,193) 59,685
Total definite lived intangible assets 640,747 (221,226) 419,521 634,184 (164,034) 470,150
(a)
Indefinite-lived intangible assets
Trademarks 11,864 — 11,864 11,866 — 11,866
Total Intangible assets $ 652,611 $ (221,226) $ 431,385 $ 646,050 $ (164,034) $ 482,016

(a) Indefinite-lived intangible assets decreased as a result of foreign currency translation.

The following table presents the amortization expense and weighted average amortization period for definite-lived
intangible assets at March 31, 2022:

Amortization expense (in thousands)

Weighted
Average
Amortization
Period
2022 2021 2020 (in years)
Developed technology $ 16,420 $ 17,405 $ 12,517 6.3
Supplier and customer relationships 43,542 50,177 36,093 12.6
Patents and non-compete agreements 679 699 544 3.4
Trademarks and tradenames 3,333 5,427 7,856 17.1
Total $ 63,974 $ 73,708 $ 57,010

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Advanced Drainage Systems, Inc.

The following table presents the future intangible asset amortization expense based on existing intangible assets at
March 31, 2022:

Fiscal Year
(Amounts in thousands) 2023 2024 2025 2026 2027 Thereafter Total
Amortization expense $ 53,214 $ 49,087 $ 45,863 $ 41,874 $ 38,507 $190,976 $419,521

8. FAIR VALUE MEASUREMENT AND DERIVATIVE TRANSACTIONS

The Company uses commodity options in the form of collars and swaps and has previously used interest rate swaps
and foreign currency forward contracts to manage its various exposures to interest rate, commodity price fluctuations
and foreign currency exchange rate fluctuations. Mark-to-market adjustments for changes in fair value and contract
settlement gains and losses for collars, commodity swaps and foreign currency forward contracts are recorded in the
Consolidated Statements of Operations in Derivative gains and other income, net.

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, 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.

Recurring Fair Value Measurements

The assets and liabilities carried at fair value as of the fiscal years ended March 31 were as follows:

March 31, 2022 March 31, 2021

(Amounts in thousands) Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Assets:
Derivative assets — diesel
fuel contracts $ 2,618 — $ 2,618 — $ 1,194 — $1,194 —
Total assets at fair value
on a recurring basis $ 2,618 — $ 2,618 — $ 1,194 $ — $1,194 $ —
Liabilities:
Derivative liability - diesel
fuel contracts $ 64 — $ 64 — $ 32 — $ 32 —
Total liabilities at fair
value on a recurring basis $ 64 — $ 64 — $ 32 — $ 32 $ —

There were no transfers in or out of Level 3 for the fiscal years ended March 31, 2022 and 2021.

A summary of the fair values for the various derivatives at March 31, 2022 and 2021 is presented below:

Diesel fuel option collars and swaps

Assets Liabilities
Other accrued Other
(Amounts in thousands) Receivables Other assets liabilities liabilities
March 31, 2022 $ 2,499 $ 119 $ (64) $ —
March 31, 2021 $ 1,125 $ 69 $ (31) $ (1)

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Advanced Drainage Systems, Inc.

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

Net Unrealized Mark-to-Market Losses (Gains)

(Amounts in thousands) 2022 2021 2020
Interest rate swaps $ — $ — $ 1,029
Diesel fuel option collars and swaps (1,392) (3,355) 2,099
Total net unrealized mark to market losses (gains) $ (1,392) $ (3,355) $ 3,128

Net Realized Losses (Gains)

(Amounts in thousands) 2022 2021 2020
Interest rate swaps $ — $ — $ 378
Foreign exchange forward contracts — 47 102
Diesel fuel option collars and swaps (3,012) 1,409 357
Total net realized losses (gains) $ (3,012) $ 1,456 $ 837

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 following table presents the carrying and fair value of the Company’s Senior Notes (as
defined below and further discussed in “Note 11. Debt”) for the periods presented:

March 31, 2022 March 31, 2021

(Amounts in thousands) Fair Value Carrying Value Fair Value Carrying Value
Senior Notes $ 349,902 $ 350,000 $ 367,633 $ 350,000
Equipment Financing 29,302 31,254 — —
Total $ 379,204 $ 381,254 $ 367,633 $ 350,000

The fair value of the Senior Notes was determined based on a quoted market data for the Company’s Senior Notes.
The categorization of the framework used to evaluate the Senior Notes is considered Level 2. The Company believes
the carrying amount on 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. INVESTMENT IN AFFILIATES

ADS Mexicana - ADS has one consolidated joint venture, ADS Mexicana, which is 51% owned by the Company’s
wholly-owned subsidiary ADS Worldwide, Inc. The equity owned by the Company’s joint venture partner is shown
as Noncontrolling interest in subsidiaries in the Consolidated Balance Sheets and the joint venture partner’s portion
of net income is shown as Net income attributable to noncontrolling interest in the Consolidated Statements of
Operations.

ADS participates in joint ventures for the purpose of expanding upon the growth of manufacturing and selling HDPE
corrugated pipe and PVC conduit in emerging markets. ADS invested in ADS Mexicana for the purpose of expanding
upon growth of manufacturing and selling ADS licensed HDPE corrugated pipe and related products in the Mexican
and Central American markets via the joint venture partner’s local presence and expertise throughout the region. The
Company executed a Technology, Patents and Trademarks Sub-License Agreement and a Distribution Agreement
with ADS Mexicana that provides ADS Mexicana with the rights to manufacture and sell ADS licensed products in
Mexico and Central America. The Company has concluded that it holds a variable interest in and is the primary
beneficiary of ADS Mexicana based on the power to direct the most significant activities of ADS Mexicana and the
obligation to absorb losses and the right to receive benefits that could be significant to ADS Mexicana. As the
primary beneficiary, the Company is required to consolidate the assets and liabilities of ADS Mexicana.

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Advanced Drainage Systems, Inc.

The table below includes the assets and liabilities of ADS Mexicana that are consolidated as of March 31, 2022 and
2021. The balances exclude intercompany transactions that are eliminated upon consolidation.

(Amounts in thousands) 2022 2021

Assets
Current assets $ 28,005 $ 21,556
Property, plant and equipment, net 14,061 13,891
Other noncurrent assets 1,933 1,425
Total assets $ 43,999 $ 36,872
Liabilities
Current liabilities $ 11,150 $ 9,186
Noncurrent liabilities 1,575 1,462
Total liabilities $ 12,725 $ 10,648

South American Joint Venture - The Company participates in an unconsolidated joint venture, the South American
Joint Venture, which is 50% owned by the Company’s wholly-owned subsidiary ADS Chile.

The Company’s investment in this unconsolidated joint venture was formed for the purpose of expanding upon the
growth of manufacturing and selling HDPE corrugated pipe in the South American market via the joint venture
partner’s local presence and expertise throughout the region. The Company has concluded that it is appropriate to
account for this investment using the equity method, whereby the Company’s share of the income or loss of the joint
venture is reported in the Consolidated Statements of Operations under Equity in net income of unconsolidated
affiliates and the Company’s investment in the joint venture is included in Other assets in the Consolidated Balance
Sheets. The Company is not required to consolidate the South American Joint Venture as it is not the primary
beneficiary, although the Company does hold significant variable interests in the South American Joint Venture
through the equity investment and debt guarantee.

10. RELATED PARTY TRANSACTIONS

ADS Mexicana - ADS conducts business in Mexico and Central America through its joint venture ADS Mexicana. In
fiscal 2019, ADS Mexicana and the Company 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 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 London Interbank Offered Rate
(“LIBOR”) plus an applicable margin based on the Leverage Ratio. As of March 31, 2022 and 2021, there were $1.5
million and no borrowings under the Intercompany Note, respectively.

South American Joint Venture - The Company’s South American Joint Venture manufactures and sells HDPE
corrugated pipe in the South American market. ADS is the guarantor for 50% of the South American Joint Venture’s
credit facility, and the debt guarantee is shared equally with the joint venture partner. The maximum potential
obligation under this guarantee totals $11.0 million as of March 31, 2022. The maximum borrowing permitted under
the South American Joint Venture’s credit facility is $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, 2023. ADS does not anticipate any required
contributions related to the balance of this credit facility. As of March 31, 2022 and 2021, the outstanding principal
balance of the credit facility including letters of credit was $9.9 million and $10.0 million, respectively. As of
March 31, 2022, there were no U.S. dollar denominated loans. The weighted average interest rate as of March 31,
2022 was 4.3% on Chilean peso denominated loans.

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Advanced Drainage Systems, Inc.

11. DEBT

Long-term debt as of the fiscal years ended March 31 consisted of the following:

(Amounts in thousands) 2022 2021

Term Loan Facility $ 434,250 $ 441,250
Senior Notes 350,000 350,000
Revolving Credit Facility 114,300 —
Equipment financing 31,254 —
Total 929,804 791,250
Unamortized debt issuance costs (1,648) (2,030)
Current maturities (19,451) (7,000)
Long-term debt obligations $ 908,705 $ 782,220

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 “Senior Notes”) pursuant to an Indenture, dated September 23, 2019 (the
“Indenture”), among the Company, the guarantors party thereto (the “Guarantors”) and U.S. Bank National
Association, as Trustee (the “Trustee”). The Senior Notes are guaranteed by each of the Company’s present and
future direct and indirect wholly owned domestic subsidiaries that is a guarantor under the Company’s Senior
Secured Credit Facility. The Senior Notes were offered and sold either to persons reasonably believed to be
“qualified institutional buyers” pursuant to Rule 144A under the Securities Act of 1933 (the “Securities Act”) or to
persons outside the United States under Regulation S of the Securities Act.

Interest on the Senior Notes will be payable semi-annually in cash in arrears on March 31 and September 30 of each
year, commencing on March 31, 2020, at a rate of 5.0% per annum. The Senior Notes will mature on September 30,
2027. The Company used the majority of the net proceeds from the offering of the Senior Notes for the repayment of
$300.0 million of its outstanding borrowings. The deferred financing costs associated with the Senior Notes totaled
$2.1 million and are recorded as a direct reduction from the carrying amount of the related debt.

The Company may redeem the Senior Notes, in whole or in part, at any time on or after September 30, 2022 at
established redemption prices. At any time prior to September 30, 2022, the Company may also redeem up to 40% of
the Senior Notes with net cash proceeds of certain equity offerings at a redemption price equal to 105.0% of the
principal amount of the Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the
redemption date. In addition, at any time prior to September 30, 2022, the Company may redeem the Senior Notes, in
whole or in part, at a redemption price equal to 100% of the principal amount of the Senior Notes to be redeemed,
plus accrued and unpaid interest, if any, to, but excluding, the redemption date plus an applicable "make-whole"
premium.

The Indenture contains customary events of default, including, among other things, payment default, failure to
comply with covenants or agreements contained in the Indenture or the Senior Notes and certain provisions related to
bankruptcy events. The Indenture also contains customary negative covenants.

Revolving Credit Facility - On September 24, 2019, the Company successfully completed a $700 million syndication
of the remaining balance of its credit facility subsequent to the common stock offering and Senior Notes due 2027
and in connection with the syndication, the Company amended the Base Credit Agreement (the “Senior Secured
Credit Facility”). The Senior Secured Credit Facility reduced the applicable margin utilized in the determination of
the interest rate, as well as other provisions.

The Senior Secured Credit Facility provides for a term loan facility in an initial aggregate principal amount of $700
million (the “Term Loan Facility”), a revolving credit facility in an initial aggregate principal amount of up to $350
million (the “Revolving Credit Facility”), a letter of credit sub-facility in the initial aggregate available amount of up
to $50 million, as a sublimit of such Revolving Credit Facility (the “L/C Facility”) and a swing line sub-facility in the
aggregate available amount of up to $50 million, as a sublimit of the Revolving Credit Facility (together with the
Term Loan Facility, the Revolving Credit Facility and the L/C Facility, the “Senior Secured Credit Facility”). Letters
of credit outstanding at March 31, 2022 amount to $9.2 million and reduced the availability of the Revolving Credit
Facility.

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Advanced Drainage Systems, Inc.

In connection with entering into the Senior Secured Credit Facility, the Company capitalized approximately $0.4
million in deferred financing fees. 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 Credit Facility are available beginning on September 24, 2019 and, to
the extent not previously paid, all then-outstanding amounts under the Revolving Credit Facility are due and payable
on the maturity date of the Revolving Credit Facility, which is five years from the Closing Date.

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 Senior Secured Credit
Facility) or at a Eurocurrency Rate, based on LIBOR (as defined in the Senior Secured Credit Facility), plus the
applicable margin as set forth therein from time to time. In the case of the Revolving Credit Facility, the applicable
margin is based on the Company’s consolidated senior secured net leverage ratio (as defined in the Senior Secured
Credit Facility). All borrowings under the Term Loan Facility used to finance the acquisition of Infiltrator as
described above initially bear interest at a Eurocurrency Rate applicable to Eurocurrency Loans (as defined in the
Senior Secured Credit Facility) denominated in U.S. Dollars.

The Company is also required to pay a commitment fee that is based upon the undrawn amounts of the Revolving
Credit Facility at a rate per annum based upon a calculated ratio as prescribed within the Senior Secured Credit
Facility. As of March 31, 2022, the rate the Company was committed to paying on the undrawn portion was equal to
0.2%.

The Company’s obligations under the Senior Secured Credit Facility have been secured by granting a first priority
lien on substantially all of the Company’s assets (subject to certain exceptions and limitations), and each of
StormTech, LLC, Advanced Drainage of Ohio, Inc. and Infiltrator Water Technologies, LLC (collectively the
“Guarantors”) has agreed to guarantee the obligations of the Company under the Senior Secured Credit Facility 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).

Equipment Financing - In November 2021, the Company purchased material handling equipment, trucks and trailers
previously leased under a master lease agreement and classified as finance leases. The purchase was funded with debt
through the Master Lease Agreement and Interim Funding Schedule with Fifth Third. The assets acquired are titled to
the Company and included in Property, plant and equipment, net on the Company's Consolidated Balance Sheet. The
equipment financings have a term of between 12 and 84 months, based on the life of the equipment, and bear a
weighted average interest of 1.4%. The current portion of the equipment financing is $12.5 million and the long-term
portion is $18.8 million at March 31, 2022.

Principal Maturities - Maturities of long-term debt (excluding interest and deferred financing costs) as of March 31,
2022 are summarized below:

Fiscal Years Ending March 31,

(Amounts in thousands) 2023 2024 2025 2026 2027 Thereafter Total
Principal maturities $ 19,451 $ 14,770 $126,254 $ 10,015 $407,442 $351,872 $929,804

12. 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, also, enters into equipment purchase contracts
with manufacturers. The Company does not have any outstanding purchase commitments as of March 31, 2022.

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.

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Advanced Drainage Systems, Inc.

13. EMPLOYEE BENEFIT PLANS

Employee Stock Ownership Plan (“ESOP”) - The Company established the Advanced Drainage Systems, Inc. ESOP
(the “ESOP” or the “Plan”) effective April 1, 1993. The Plan was funded through a transfer of assets from the
Company’s tax-qualified profit-sharing retirement plan, as well as a 30-year term loan from ADS. Prior to the loan
repayment in March 2022, the Plan operated as a tax-qualified leveraged ESOP and was designed to enable eligible
employees to acquire stock ownership interest in ADS. Employees of ADS who have reached the age of 18 were
generally eligible to participate in the Plan on March 31 after six months of service. Upon retirement, disability,
death, or vested terminations, (i) a participant or designated beneficiary was able to elect to receive the amount in
their account attributable to the 1993 transfer of assets from the Company’s tax-qualified profit sharing retirement
plan in the form of cash or ADS stock with any fractional shares paid in cash; (ii) stock credited to the participants’
ESOP stock account resulting from the ESOP’s loan repayments were distributed in the form of ADS stock, and (iii)
amounts credited to the participants’ ESOP cash account were distributed in the form of cash. Upon attainment of age
50 and seven years of participation in the Plan, a participant could elect to diversify specified percentages of the
number of shares of ADS stock credited to the participant’s ESOP stock account in compliance with applicable law.

The Company was obligated to make contributions to the Plan, which, when aggregated with the Plan’s dividends on
the Plan’s unallocated shares of redeemable convertible preferred stock, 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. As the Plan
made annual payments of principal and interest, an appropriate percentage of preferred stock was allocated to ESOP
participants’ accounts in accordance with plan terms that are compliant with applicable Internal Revenue Code and
regulatory provisions. Required dividends on allocated shares are generally passed through and paid in cash to the
participants based on the total shares in their account and required dividends on unallocated shares are paid in cash to
the Plan and generally used to service the Plan’s debt.

The carrying value of redeemable convertible preferred stock held by the ESOP trust, but not yet earned by the ESOP
participants or used for dividends, was reported as Deferred compensation - unearned ESOP shares within the
Mezzanine equity section of the Consolidated Balance Sheets. In February 2022, the Company made a cash
contribution to the ESOP, and the ESOP repaid the remaining ESOP loan triggering the release of the remaining
0.3 million shares of Preferred Stock from the pledge, resulting in the ESOP acceleration. As a result of the ESOP
acceleration, the Company recognized additional compensation expense of $30.4 million. In April 2022, all currently
outstanding shares of Preferred Stock held by the ESOP were converted into shares of the Company’s common stock
at the Conversion Rate of 0.7692.

Compensation expense and related dividends paid with ESOP shares for services rendered throughout the period are
recognized based upon the annual fair value of the shares allocated. Deferred compensation - unearned ESOP shares
is relieved at fair value, with any difference between the annual fair value and the carrying value of shares when
allocated being added to Additional paid in capital. Information regarding ESOP compensation expense (excluding
the ESOP Acceleration and Special Dividend Compensation) are included below:

(Amounts in thousands, except per share values) 2022 2021 2020

Fair value of shares allocated $ 91.41 $ 79.56 $ 22.70
Average annual fair value per share $ 85.49 $ 51.13 $ 21.31
ESOP compensation expense $ 53,401 $ 44,981 $ 20,126

Redeemable Convertible Preferred Stock - Prior to the conversion of preferred stock to common stock, the Trustee
of the Company’s ESOP had the ability to put shares of the redeemable convertible preferred stock to the Company
absent a market for the Company’s common stock, and as a result the redeemable convertible preferred stock was
classified as Mezzanine equity in the Company’s Consolidated Balance Sheets. The put option requirements of the
Internal Revenue Code apply in the event that the Company’s common stock is not a registration type class of
security or its trading has been restricted. Therefore, the holders of Redeemable convertible preferred stock had a put
right to require the Company to repurchase such shares in the event that the common stock is not listed for trading or
otherwise quoted on the NYSE, AMEX, NASDAQ, or any other market more senior than the OTC Bulletin Board.
As of March 31, 2022, the applicable redemption value was $0.7818 per share as there were no unpaid cumulative
dividends.

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Advanced Drainage Systems, Inc.

The Redeemable convertible preferred stock has a required cumulative 2.5% dividend (based on the liquidation value
of $0.7818 per share) and is convertible at a rate of 0.7692 shares of common stock for each share of Redeemable
convertible preferred stock. The 2.5% annual dividend is payable in cash or additional shares of the Redeemable
convertible preferred stock.

Cash and stock dividends on allocated Redeemable convertible preferred stock for the fiscal years ended March 31,
2022 and 2021, respectively, are summarized in the following table.

(Amounts in thousands) 2022 2021

Quarterly cash dividends $ 5,645 $ 5,238
Annual cash dividends 1 4
Total cash dividends $ 5,646 $ 5,242
Annual stock dividend 294 349
Annual cash dividend 1 4
Total ESOP required dividends $ 295 $ 353
Allocated shares 15,133 18,124
Required dividend per share 0.0195 0.0195
Required dividends $ 295 $ 353

Executive Retirement Expense – ADS has employment agreements with certain executives that include potential
payments to be made to those executives upon termination at the required retirement age, which is accrued on a
straight-line basis over the service period. The Company recognized compensation benefit related to the executive
termination payments of $0.1 million in the fiscal year ended March 31, 2022. The Company did not recognized
expense in the fiscal year ended March 31, 2021. The Company recognized $0.2 million of compensation expense in
the fiscal year ended March 31, 2020. The expense is included in Selling, general and administrative expenses in the
Consolidated Statements of Operations. As of March 31, 2022 and 2021, the executive termination payment
obligation was $1.4 million and $2.5 million, respectively, and is included in Other accrued liabilities and Other
liabilities in the Consolidated Balance Sheets.

Profit-Sharing Retirement Plan - The Company has a tax-qualified profit-sharing retirement plan with a 401(k)
feature, into which Infiltrator is part of beginning in the fiscal year ended March 31, 2022, covering substantially all
U.S. eligible employees. Except for employer matching contributions made on behalf of Infiltrator employee-
participants, the Company did not make employer contributions to this plan in the fiscal years ended March 31, 2022,
2021, and 2020. On April 11, 2022, our ESOP was merged into our existing 401(k) retirement plan effective April 1,
2022 (the "KSOP") completed the conversion of all outstanding shares of our preferred stock held by the ESOP on
March 31, 2022, and then by the KSOP into common stock, in accordance with the conversion terms of the preferred
stock. After the conversion, the common stock held by the KSOP will remain classified as mezzanine equity as the
shares are subject to the put option requirements of the Internal Revenue Code.

The Company has defined contribution postretirement benefit plans covering Canadian employees. The Company
recognized costs of $1.5 million, $0.6 million and $0.5 million in the fiscal years ended March 31, 2022, 2021, and
2020, respectively.

COVID-19 Pandemic Pay – In fiscal 2021, the Company communicated to all hourly employees that each would be
entitled to the equivalent of two weeks, or 80 hours, of pandemic pay regardless of whether they experienced any
interruption of employment. The Company recognized pandemic pay costs in Costs of goods sold on the Company’s
Consolidated Statement of Operations and accrued pandemic pay liability in Other accrued liabilities on the
Company’s Consolidated Balance Sheet of $4.8 million in the fiscal year ended March 31, 2021. The Company did
not recognize any pandemic pay in fiscal year 2022.

14. STOCK-BASED COMPENSATION

The Company has several programs for stock-based payments to employees and directors, including stock options,
performance-based restricted units and restricted stock. Stock-based compensation expense is recorded in Selling,
general and administrative expenses and Cost of goods sold in the Consolidated Statements of Operations.

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Advanced Drainage Systems, Inc.

The Company recognized stock-based compensation expense in the following line items on the Consolidated
Statements of Operations for the fiscal years ended March 31, 2022, 2021, and 2020:

(Amounts in thousands) 2022 2021 2020

Component of income before income taxes:
Cost of goods sold $ 2,680 $ 1,931 $ 897
Selling, general and administrative expenses 21,478 18,522 11,372
Total stock-based compensation expense $ 24,158 $ 20,453 $ 12,269

The following table summarizes stock-based compensation expense by award type for the fiscal years ended
March 31, 2022, 2021, and 2020:

(Amounts in thousands) 2022 2021 2020

Stock-based compensation expense:
Stock options $ 3,204 $ 2,908 $ 2,554
Restricted stock 5,846 5,177 3,807
Performance-based restricted stock units 13,307 11,017 4,682
Non-employee director restricted stock 1,801 1,351 1,226
Total stock-based compensation expense $ 24,158 $ 20,453 $ 12,269

Stock option awards are measured based on the grant date estimated fair value of each award. Compensation expense
for stock options is recognized on a straight-line basis over the employee’s requisite service period, which is
generally the vesting period of the grant. The Company estimates the fair value of stock options using a Black-
Scholes option-pricing model. The following table summarizes the assumptions used in estimating the fair value of
stock options:

2022 2021 2020

Common stock price $105.82 $41.97 - $71.55 $27.44 - $41.85
Expected stock price volatility 41.0% 35.5% - 36.3% 30.1% - 30.9%
Risk-free interest rate 1.1% 0.4% - 0.6% 1.4% - 2.3%
Weighted-average expected life (years) 6.0 6.0 6.0
Dividend yield 0.3% 0.5% - 0.9% 0.9% - 1.3%

The fair value of restricted stock and performance-based restricted stock units is based on the fair value of the
Company’s common stock at the date of grant. Compensation expense is recognized on a straight-line basis over the
employee’s requisite service period, which is generally the vesting period of the grant.

2017 Omnibus Plan

On May 24, 2017, the Board of Directors approved the 2017 Omnibus Incentive Plan which was approved by the
Company’s stockholders on July 17, 2017 (the “2017 Incentive Plan”). On May 19, 2021, the Board of Directors
adopted an amendment to the 2017 Incentive Plan to increase the total number of shares available for issuance from
3.5 million to 5.0 million, which was approved by the Company's stockholders on July 22, 2021. The 2017 Incentive
Plan, as amended, 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. The Company had
approximately 2.6 million shares available for awards as of March 31, 2022.

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Advanced Drainage Systems, Inc.

Stock Options - The stock option activity for the fiscal year ended March 31, 2022 is summarized as follows:

Weighted
Weighted Average
Average Remaining
Number Exercise Contractual
(Share amounts in thousands) of Shares Price Term (in years)
Outstanding at beginning of year 939 $ 29.69 7.9
Granted 101 105.82 —
Exercised (80) 30.08 —
Forfeited (16) 49.11 —
Outstanding at end of year 944 37.48 7.1
Vested at end of year 582 26.26 6.4
Unvested at end of year 362 55.50 8.1
Fair value of options granted during the year $ 41.36

As of March 31, 2022, there was a total of $4.2 million of unrecognized compensation expense related to unvested
stock option awards under the 2017 Incentive Plan, as amended, that will be recognized as an expense as the awards
vest over the remaining weighted average service period of 1.8 years. All outstanding options are expected to vest.
The aggregate intrinsic value for options outstanding and exercisable as of March 31, 2022 was $76.8 million and
$53.8 million, respectively. The total intrinsic value of options exercised during the fiscal years ended March 31,
2022, 2021, and 2020 were $6.8 million, $4.0 million and $0.1 million, respectively.

Restricted Stock - The information about the unvested restricted stock grants as of March 31, 2022 is as follows:

Weighted
Average
Number Grant Date
(Share amounts in thousands) of Shares Fair Value
Unvested at beginning of year 382 $ 36.03
Granted 74 110.96
Vested (202) 34.82
Forfeited (9) 60.51
Unvested at end of year 245 $ 58.68

At March 31, 2022, there was approximately $7.3 million of unrecognized compensation expense related to the
restricted stock that will be recognized over the weighted average remaining service period of 1.7 years. The total fair
value of restricted stock that vested during fiscal year ended March 31, 2022, 2021 and 2020 was $7.0 million, $3.6
million and $2.3 million, respectively.

Performance-based Restricted Units (“performance units”) - The information about the performance units granted
under the 2017 Omnibus Plan is as follows:

Weighted
Number Average Grant
(Share amounts in thousands) of Shares Date Fair Value
Unvested at beginning of year 485 $ 35.21
Granted 65 105.82
Added by Performance Factor 115 25.85
Vested (245) 25.85
Forfeited (16) 43.79
Unvested at end of year 404 $ 46.34

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Advanced Drainage Systems, Inc.

At March 31, 2022, there was approximately $8.7 million of unrecognized compensation expense related to the
performance units that will be recognized over the weighted average remaining service period of 1.5 years. For the
performance units granted in fiscal 2022, 2021 and 2020, 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 or cash flows from operations for the performance period. The performance units each have a
3-year performance period. 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.

In addition to the performance units based on ADS performance, the Company issued performance units based on the
achievements of other performance targets. During fiscal year 2020, the Company granted 0.1 million units, subject
to achieving predetermined synergies of the now consolidated legacy ADS business and Infiltrator, and 0.1 million
units, subject to performance conditions of the Infiltrator reportable segment. For the performance units based on the
Infiltrator reportable segment, 75% of the award is based upon the achievement of certain levels of Adjusted
EBITDA for the performance period and 25% is based upon the achievement of certain levels of Free cash flow for
the performance period. These two performance unit grants have a performance period from August 1, 2019 through
March 31, 2022.

2000 and 2013 Stock Options Plans

2000 Plan - The Company’s 2000 stock option plan (“2000 Plan”) provided for the issuance of statutory and non-
statutory stock options to management based upon the discretion of the Board of Directors. The plan generally
provided for grants with the exercise price equal to fair value on the date of grant, which vest in three equal annual
amounts beginning in year five and expire after approximately 10 years from issuance. The Company had no shares
available for grant under the 2000 Plan as of March 31, 2022.

2013 Plan - The Company’s 2013 stock option plan (“2013 Plan”) provided for the issuance of non-statutory
common stock options to management subject to the Board’s discretion. The plan generally provided for grants with
the exercise price equal to fair value on the date of grant. The grants generally vest in three to five equal annual
amounts beginning in year one and expire after approximately 10 years from issuance. The Company had no shares
available for grant under the 2013 Plan as of March 31, 2022. All outstanding options are expected to vest.

The stock option activity for the fiscal year ended March 31, 2022 is summarized as follows:

2000 Plan 2013 Plan

Weighted
Average Weighted
Weighted Remaining Average
Weighted Remaining
Average Contractual Average Contractual
Number Exercise Term (in Number Exercise Term (in
(Share amounts in thousands) of Shares Price years) of Shares Price years)
Outstanding at beginning of year 37 $ 14.97 2.6 316 $ 19.48 3.7
Granted — — — — — —
Exercised (24) 14.96 — (102) 16.88 —
Forfeited — — — — — —
Outstanding at end of year 13 15.00 1.7 214 20.72 3.0
Vested at end of year 13 15.00 1.7 214 20.72 3.0
Unvested at end of year — $ — — — $ — —

For the 2000 Plan, the aggregate intrinsic value for options outstanding and currently exercisable as of March 31,
2022 was $1.4 million and $1.4 million, respectively. The total intrinsic value of options exercised during the fiscal
years ended March 31, 2022, 2021, and 2020 were $2.4 million, $2.1 million and $0.2 million, respectively.

For the 2013 Plan, the aggregate intrinsic value for options outstanding and currently exercisable as of March 31,
2022 was $21.0 million and $21.0 million, respectively. The total fair value of options that vested during the fiscal
years ended March 31, 2022, 2021, and 2020 were less than $0.1 million, $0.1 million, and $0.8 million, respectively.
The total intrinsic value of options exercised during the fiscal year ended March 31, 2022 was $10.8 million.

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Advanced Drainage Systems, Inc.

2008 Restricted Stock Plan

On September 16, 2008, the Board of Directors adopted the restricted stock plan, which provided for the issuance of
restricted stock awards to certain key employees. Employees with restricted stock have the right to dividends on the
shares awarded (vested and unvested) in addition to voting rights on non-forfeited shares.

The Company had no shares available for grant under this plan as of March 31, 2022. The Company expects all
restricted stock grants to vest.

During the fiscal years ended March 31, 2022, 2021, and 2020, the total fair value of restricted stock that vested was
less than $0.1 million, $0.2 million and $0.9 million, respectively.

15. INCOME TAXES

The components of Income (loss) before income taxes for the fiscal years ended March 31 are as follows:

(Amounts in thousands) 2022 2021 2020

United States $ 355,763 $ 291,296 $ (186,209)
Foreign 27,748 20,975 6,595
Total $ 383,511 $ 312,271 $ (179,614)

The components of Income tax expense for the fiscal years ended March 31 consisted of the following:

(Amounts in thousands) 2022 2021 2020

Current:
Federal $ 76,220 $ 76,986 $ 10,867
State and local 23,484 17,189 4,655
Foreign 8,143 5,921 1,546
Total current tax expense 107,847 100,096 17,068
Deferred:
Federal 6,629 (12,250) 210
State and local (3,159) (1,269) (1,228)
Foreign (1,246) (195) (1,958)
Total deferred tax expense (benefit) 2,224 (13,714) (2,976)
Total Income tax expense $ 110,071 $ 86,382 $ 14,092

For the fiscal years ended March 31, the effective tax rate varied from the statutory Federal income tax rate as a result
of the following factors:

2022 2021 2020

Federal statutory rate 21.0 % 21.0 % 21.0 %
(a)
ESOP stock appreciation, ESOP dividends and special dividend 4.3 2.7 (30.3)
Effect of tax rate of foreign subsidiaries 0.4 0.5 0.6
State and local taxes—net of federal income tax benefit 4.2 3.9 (1.7)
Uncertain tax position change (0.2) (0.5) 1.2
Equity-based compensation (2.9) (1.4) 1.1
Executive compensation 2.6 1.5 (0.8)
Net operating losses — 0.2 1.9
Other (0.7) (0.2) (0.9)
Effective rate 28.7 % 27.7 % (7.9)%

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Advanced Drainage Systems, Inc.

(a) This includes the special dividend paid in the first quarter of fiscal 2020 that resulted in $246.8 million in additional stock-based
compensation. Of the total stock-based compensation expense and dividends paid, approximately $242.9 million related to non-deductible
stock appreciation and deductible dividends. This decreased the effective tax rate by 28.4%. See “Note 16. Net Income Per Share and
Stockholders’ Equity” for additional information.

As of March 31, 2022, the Company intends to repatriate earnings from Canada and believes that there will be no
additional tax costs associated with the repatriation of such earnings other than any potential non-U.S. withholding
taxes. No deferred tax liability has been recognized as of March 31, 2022. The Company has approximately $22.2
million of undistributed earnings from other foreign entities that are intended to be reinvested indefinitely with the
exception of cash dividends paid by the Company’s ADS Mexicana joint venture. It is not practicable to estimate the
amount of U.S. tax, which would primarily relate to withholding tax, that might be payable on the eventual
remittance of such undistributed earnings.

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax
liabilities at March 31 were comprised of:

(Amounts in thousands) 2022 2021

Deferred tax assets:
Stock-based compensation $ 5,736 $ 5,084
Operating lease liabilities 13,702 7,403
Other 12,243 12,488
Total deferred tax assets 31,681 24,975
Less: valuation allowance (269) (405)
Total net deferred tax assets 31,412 24,570
Deferred tax liabilities:
Intangible assets 94,834 106,012
Property, plant and equipment 82,193 66,546
Operating lease assets 13,540 7,365
Goodwill 6,824 5,686
Other 1,345 568
Total deferred tax liabilities 198,736 186,177
Net deferred tax liabilities $ 167,324 $ 161,607

Net deferred tax assets and liabilities are included in Other assets and Deferred tax liabilities, respectively, on the
Consolidated Balance Sheets. The related balances at March 31 were as follows:

(Amounts in thousands) 2022 2021

Net non-current deferred tax assets $ 1,111 $ 578
Net non-current deferred tax liabilities 168,435 162,185

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Advanced Drainage Systems, Inc.

Accounting for Uncertain Tax Positions

As of March 31, 2022, The Company had unrecognized tax benefit of $0.7 million, which if resolved favorably,
would reduce income tax expense by $0.7 million. A reconciliation of the beginning and ending amounts of
unrecognized tax benefits for the years ended March 31 is as follows:

(Amounts in thousands) 2022 2021 2020

Balance at beginning of year $ 1,686 $ 3,343 $ 5,681
Tax positions taken in current year — — —
Decreases in tax positions for prior years (118) — (1,398)
Increases in tax positions for prior years — 105 1,907
Settlements — (284) (124)
Lapse of statute of limitations (817) (1,640) (2,589)
Foreign translation adjustment (5) 162 (134)
Balance at end of year $ 746 $ 1,686 $ 3,343

The short-term portion of the unrecognized tax benefit of $0.1 million at March 31, 2022 is recorded in Other accrued
liabilities on the Company’s Consolidated Balance Sheet. The long-term portion of unrecognized tax benefits are
recorded in Other liabilities in the Company’s Consolidated Balance Sheets. These amounts include potential accrued
interest and penalties of $0.2 million and $0.5 million at March 31, 2022 and 2021, respectively.

The Company believes that over the next twelve months, it is reasonably possible that up to $0.1 million of
unrecognized tax benefits could be resolved as the result of settlements of audits and the expiration of statutes of
limitation. Final settlement of these issues may result in payments that are more or less than this amount, but the
Company does not anticipate that the resolution of these matters will result in a material change to its consolidated
financial position or results of operations.

The Company is currently open to audit under the statute of limitations by the IRS for the fiscal years ended March
31, 2019 through March 31, 2022. The majority of the Company’s state income tax returns are open to audit under
the statute of limitations for the years ended March 31, 2018 through March 31, 2022. The foreign income tax returns
are open to audit under the statute of limitations for the years ended March 31, 2018 through March 31, 2022.

16. NET INCOME PER SHARE AND STOCKHOLDERS’ EQUITY

Basic net income per share is calculated by dividing the Net income available to common stockholders by the
weighted-average number of common shares outstanding during the period, without consideration for common stock
equivalents. Diluted net income per share is computed by dividing the Net income available to common stockholders
by the weighted-average number of common stock equivalents outstanding for the period.

Holders of redeemable convertible preferred stock participate in dividends on an as-converted basis when declared on
common stock. As a result, redeemable convertible preferred stock meets the definition of participating securities,
which requires the Company 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 dilutive effect of stock options, redeemable common stock, performance units and unvested nonparticipating
restricted stock is based on the more dilutive of the treasury stock method or the diluted two-class method. These
potential common stock equivalents are only included in the calculations when their effect is dilutive.

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Advanced Drainage Systems, Inc.

The following table presents information necessary to calculate net income per share for the fiscal years ended
March 31, 2022, 2021, and 2020, 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:

(Amounts in thousands, except per share data) 2022 2021 2020

NET INCOME (LOSS) PER SHARE — BASIC:
Net income (loss) attributable to ADS $ 271,331 $ 224,230 $ (193,174)
Adjustment for:
Dividends paid to participating securities (5,940) (5,591) (11,544)
Net income available to common stockholders and participating securities 265,391 218,639 (204,718)
Undistributed income allocated to participating securities (35,859) (33,251) —
Net income available to common stockholders — Basic 229,532 185,388 (204,718)
Weighted average number of common shares outstanding — Basic 71,276 70,155 63,820
Net income (loss) per common share — Basic $ 3.22 $ 2.64 $ (3.21)
NET INCOME (LOSS) PER SHARE — DILUTED:
Net income (loss) available to common stockholders — Diluted 229,532 185,388 (204,718)
Weighted average number of common shares outstanding — Basic 71,276 70,155 63,820
Assumed restricted stock - nonparticipating 245 247 —
Assumed exercise of stock options 882 844 —
Assumed performance units 508 320 —
Weighted average number of common shares outstanding — Diluted 72,911 71,566 63,820
Net income (loss) per common share —Diluted $ 3.15 $ 2.59 $ (3.21)
Potentially dilutive securities excluded as anti-dilutive 12,925 14,594 14,449

Common Stock Offering – On September 10, 2019, the Company issued and sold an aggregate of 10,350,000 shares
of common stock, $0.01 par value per share, which included the full exercise of the underwriters’ option to purchase
additional shares, at a price of $29.75 per share, before underwriting discounts and commissions. The common stock
was sold pursuant to the Company’s shelf registration statement and related prospectus supplement. The Company
received proceeds of $293.6 million from the issuance after deducting underwriting discounts and commissions and
offering expenses. The Company used the net proceeds for the repayment of a portion of the outstanding borrowings
under the Senior Secured Credit Facility.

Stockholders’ Equity - The Company repurchased 2.6 million shares of common stock at a cost of $292.0 million
during the fiscal year March 31, 2022. The Company did not repurchase any shares during the fiscal year ended
March 31, 2021. The repurchases were made under the Board of Directors' authorization in May 2021 to repurchase
an additional $250 million of ADS Common Stock, in addition to the $42 million previously authorized, in
accordance with applicable security laws. In February 2022, the Company announced that the Board approved a $1.0
billion stock repurchase program (the “Repurchase Program”) of ADS common stock in accordance with applicable
securities laws. The Repurchase Program replaces the previously established share repurchase program, which has no
remaining available capacity. 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.

Employees Stock Ownership Plan (“ESOP”) and the Special Dividend - During fiscal year ended March 31, 2020,
the Board of Directors approved a special cash dividend of $1.00 per share and quarterly dividends of $0.09 per
share. 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 acceleration and special dividend
compensation and Selling, general and administrative - ESOP acceleration and special dividend compensation on the

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Advanced Drainage Systems, Inc.

Company’s Consolidated Statement of Operations. The Company’s ESOP is further described in "Note 13. Employee
Benefit Plans".

17. OTHER ACCRUED LIABILITIES

Other accrued liabilities as of fiscal years ended March 31 consisted of the following:

(Amounts in thousands) 2022 2021

(a)
Accrued compensation and benefits $ 52,822 $ 42,075
(b)
Accrued rebate liability 24,331 16,834
Lease liability - Operating leases 14,203 8,995
Self-insurance accruals 7,048 11,257
Other 36,473 36,990
Total accrued liabilities $ 134,877 $ 116,151

(a) Accrued compensation and benefits is primarily comprised of accrued payroll, bonuses and commissions.
(b) Accrued rebate liability represents the Company’s estimated rebates to be paid to customers.

18. BUSINESS SEGMENT INFORMATION

ADS 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. “Pipe” and “Allied
Products & Other” were previously included as Domestic. The Chief Operating Decision Maker (“CODM”) reviews
financial information and makes operational decisions based on Net Sales and Segment Adjusted Gross Profit. The
Company calculates Segment Adjusted Gross Profit as net sales less costs of goods sold, depreciation and
amortization, stock-based compensation, non-cash charges and certain other expenses. A measure of assets is not
applicable, as segment assets are not regularly reviewed by the CODM for evaluating performance or allocating
resources.

Pipe – The Pipe segment manufactures and markets high performance thermoplastic corrugated pipe throughout the
United States. The Company maintains and serves these markets through product distribution relationships with
many of the largest national and independent waterworks distributors, buying groups and co-ops, major national
retailers as well as an extensive network of hundreds of small to medium-sized distributors across the U.S.

Products include single wall pipe, N-12 HDPE pipe sold into the Storm sewer, Infrastructure and Agriculture
markets, High Performance polypropylene pipe sold into the Storm sewer, Infrastructure and sanitary sewer markets.
Products are designed primarily for storm water management in the construction and infrastructure marketplace
across a broad range of end markets and applications, including non-residential, residential, agriculture and
infrastructure. Products are manufactured using HDPE and polypropylene plastic material.

Infiltrator – Infiltrator is a leading national provider of plastic leachfield chambers and systems, septic tanks and
accessories, primarily for use in residential applications. Infiltrator products are used in onsite septic wastewater
treatment systems in the United States and Canada.

International – The International segment manufactures and markets pipe and allied products in certain regions
outside of the United States, including Company owned facilities in Canada, subsidiaries that distribute to Europe
and the Middle East, exports and through the Company’s joint ventures with local partners in Mexico and South
America. The Company’s Mexican joint venture, ADS Mexicana, primarily serves the Mexican and Central
American markets, while its South American Joint Venture, Tigre-ADS, is the primary channel to serve the South
American markets. The Company’s International product lines include single wall pipe, N-12 HDPE pipe, high
performance PP pipe and certain geographies also purchase the Company’s broad line of Allied Products & Other for
sales internationally.

Allied Products & Other – Allied Products & Other manufactures and markets products throughout the United States.
Products include StormTech, Nyloplast, ARC Septic Chambers, Inserta Tee, water quality filters and structures,
Fittings, and FleXstorm. The Company maintains and serves these markets through product distribution relationships

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Advanced Drainage Systems, Inc.

with many of the largest national and independent waterworks distributors, major national retailers as well as an
extensive network of hundreds of small to medium-sized distributors across the U.S. The Company also sells through
a broad variety of buying groups and co-ops in the United States. The Company aggregates operating segments
within the Allied Products & Other segment disclosure. None of the operating segments within the Allied Products &
Other businesses segment disclosure exceeds the quantitative thresholds for separate segment reporting.

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 fiscal years ended March 31:

2022
Net Sales from
Intersegment Net External
(Amounts in thousands) Net Sales Sales Customers
Pipe $ 1,555,248 $ (15,814) $ 1,539,434
Infiltrator 551,906 (91,406) 460,500
International
International - Pipe 171,525 (19,430) 152,095
International - Allied Products & Other 53,217 — 53,217
Total International 224,742 (19,430) 205,312
Allied Products & Other 569,352 (5,283) 564,069
Intersegment Eliminations (131,933) 131,933 —
Total Consolidated $ 2,769,315 $ — $ 2,769,315

2021
Net Sales from
Intersegment Net External
(Amounts in thousands) Net Sales Sales Customers
Pipe $ 1,059,200 $ (6,280) $ 1,052,920
Infiltrator 397,813 (68,669) 329,144
International
International - Pipe 121,468 (6,589) 114,879
International - Allied Products & Other 43,390 — 43,390
Total International 164,858 (6,589) 158,269
Allied Products & Other 442,447 — 442,447
Intersegment Eliminations (81,538) 81,538 —
Total Consolidated $ 1,982,780 $ — $ 1,982,780

2020
Net Sales from
Intersegment Net External
(Amounts in thousands) Net Sales Sales Customers
Pipe $ 954,633 $ (2,030) $ 952,603
Infiltrator 211,005 (41,657) 169,348
International
International - Pipe 108,624 — 108,624
International - Allied Products & Other 39,957 — 39,957
Total International 148,581 — 148,581
Allied Products & Other 403,273 — 403,273
Intersegment Eliminations (43,687) 43,687 —
Total Consolidated $ 1,673,805 $ — $ 1,673,805

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Advanced Drainage Systems, Inc.

The following sets forth certain financial information attributable to the reportable segments for the fiscal years ended
March 31:

(Amounts in thousands) 2022 2021 2020

Segment adjusted gross profit
Pipe $ 353,182 $ 322,846 $ 239,531
Infiltrator 231,825 191,163 98,245
International 58,822 49,921 36,999
Allied Products & Other 284,091 225,052 201,206
Intersegment Eliminations (28) (503) (1,895)
Total $ 927,892 $ 788,479 $ 574,086
Depreciation and amortization
Pipe $ 49,601 $ 46,078 $ 46,611
Infiltrator 14,021 12,468 7,159
International 5,464 5,430 6,013
(a)
Allied Products & Other 72,722 81,610 65,157
Total $ 141,808 $ 145,586 $ 124,940
Capital expenditures
Pipe $ 64,660 $ 17,135 $ 33,629
Infiltrator 72,435 54,024 24,917
International 3,301 1,627 2,623
(a)
Allied Products & Other 8,687 5,971 6,508
Total $ 149,083 $ 78,757 $ 67,677

(a) Includes depreciation and amortization and capital expenditures not allocated to a reportable segment. The
amortization expense of Infiltrator intangible assets acquired is included in Allied Products & Other.

Reconciliation of Gross Profit to Segment Adjusted Gross Profit

(Amounts in thousands) 2022 2021 2020

Reconciliation of Segment Adjusted Gross Profit:
Total Gross Profit $ 800,384 $ 690,082 $ 316,479
Depreciation and amortization 71,705 66,408 62,225
ESOP and stock-based compensation expense 36,622 31,792 14,319
ESOP acceleration and special dividend
compensation 19,181 — 168,610
(a)
COVID-19 related expenses — 197 4,573
Inventory step up related to Infiltrator acquisition — — 7,880
Total Segment Adjusted Gross Profit $ 927,892 $ 788,479 $ 574,086

(a) Represents the Company’s pandemic pay expense included in Gross profit in connection with the
Company’s response to the COVID-19 pandemic, see “Note 13. Employee Benefit Plans” for additional
information.

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Advanced Drainage Systems, Inc.

Geographic Sales and Assets Information

Net sales are attributed to the geographic location based on the location of the customer. The table below represents
the Net sales and long-lived asset information by geographic location for each of the fiscal years ended March 31:

(Amounts in thousands) 2022 2021 2020

Net Sales
North America $ 2,746,521 $ 1,966,947 $ 1,655,219
Other 22,794 15,833 18,586
Total $ 2,769,315 $ 1,982,780 $ 1,673,805

(Amounts in thousands) 2022 2021

(a)
Long-Lived Assets
North America $ 628,985 $ 511,290
Other 12,463 11,861
Total $ 641,448 $ 523,151

(a) For segment reporting purposes, long-lived assets include Investments in unconsolidated affiliates, Central
parts and Property, plant and equipment.

19. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Supplemental disclosures of cash flow information for the fiscal years ended March 31 were as follows:

(Amounts in thousands) 2022 2021 2020

Supplemental disclosures of cash flow information — cash paid during years:
Interest $ 32,837 $ 37,614 $ 41,290
Income taxes 106,355 97,636 8,710

(Amounts in thousands) 2022 2021 2020

Supplemental disclosures of noncash investing and financing activities:
Redeemable convertible preferred stock dividend $ 294 $ 349 $ 359
Purchases of plant, property, and equipment
included in accounts payable 18,328 6,754 1,588
Accrued withholding taxes on vesting of restricted stock units 2,669 — —
ESOP distributions in common stock 45,560 28,585 13,109
Lease obligations retired upon disposition of leased assets 589 1,940 799

20. SUBSEQUENT EVENTS

Dividends on Common Stock - During the first quarter of fiscal 2023, the Company declared a quarterly cash
dividend of $0.12 per share of common stock. The dividend is payable on June 15, 2022 to stockholders of record at
the close of business on June 1, 2022.

Acquisition - On April 29, 2022, the Company completed its acquisition of substantially all of the assets of Cultec,
Inc. (“Cultec”). Cultec was a family-owned technology leader in the stormwater and onsite septic wastewater
industries. The acquisition of Cultec expands the Company’s portfolio of innovative water management solutions in
the stormwater and onsite septic wastewater industries.

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Advanced Drainage Systems, Inc.

Employee Stock Ownership Plan - In April 2022, all currently outstanding shares of Preferred Stock held by the
ESOP were converted into shares of the Company’s common stock. See “Note 13. Employee Benefit Plans” for
additional information.

******

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 SCHEDULE II

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Valuation and Qualifying Accounts for the Fiscal Years Ended March 31, 2022, 2021 and 2020 (in
thousands):

Allowance for Credit Losses:

Balance at Charged to Charged to Balance at

beginning costs and CECL other end of
Fiscal Year ended March 31, of period expenses (1) Adoption (2) accounts (3) Deductions period
2022 $ 5,323 $ 3,237 $ — $ 123 $ (485) $ 8,198
2021 5,035 1,338 779 99 (1,928) 5,323
2020 7,653 (24) — (234) (2,360) 5,035

(1) Amount for the year ended March 31, 2020 includes $0.4 million due to the Acquisition.
(2) Amount represents the impact of the adoption of ASU 2016-13.
(3) Amounts represent the impact of foreign currency translation.

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 Board of Directors Executive Officers

Robert Kidder Scott Barbour

Chairman Director, President and
Chief Executive Officer
Scott Barbour
Director, President and Scott A. Cottrill About Advanced
Chief Executive Officer Executive Vice President,
Chief Financial Officer, Secretary Drainage Systems, Inc.
Anesa Chaibi
President and CEO Darin Harvey
Coolsys, Inc. Executive Vice President, Supply Chain

Brian King Advanced Drainage Systems is a leading provider of innovative water management solutions in
Michael Coleman
Executive Vice President the stormwater and onsite septic wastewater industries, providing superior drainage solutions
Partner
Product Management and Marketing for use in the construction and agriculture marketplace. For over 50 years, the Company
Ice Miller LLP
has been manufacturing a variety of innovative and environmentally friendly alternatives to
Robert M. Eversole Robert M. Klein traditional materials. Its innovative products are used across a broad range of end markets and
Managing Partner Executive Vice President, applications, including non-residential, residential, infrastructure and agriculture applications.
Stonehenge Partners, Inc. Market Management
The Company has established a leading position in many of these end markets by leveraging its
national sales and distribution platform, overall product breadth and scale and manufacturing
Alexander R. Fischer Roy E. Moore, Jr.
excellence. Founded in 1966, the Company operates a global network of approximately 70
Former President and Chief Executive Officer Executive Vice President, Infiltrator
manufacturing plants and 38 distribution centers. To learn more about ADS, please visit the
Columbus Partnership
Kevin C. Talley Company’s website at [Link].
Tanya Fratto Executive Vice President and
Retired President and Chief Executive Officer Chief Administrative Officer
General Electric Superabrasives
Michael Huebert
M.A. (Mark) Haney Senior Vice President, Sales
Retired Executive Vice President of Olefins
and Polyolefins Thomas Waun
Chevron Phillips Chemical Company LP Senior Vice President, International
Product Development and Material Sciences
Ross M. Jones
Managing Director
Berkshire Partners
Chairman Emeritus
Carl A. Nelson, Jr.
Retired Managing Partner Joe Chlapaty
Arthur Andersen Chlapaty Investments LLC
Manuel J. Perez de la Mesa Retired Chairman, President and
Retired President and Chief Executive Officer Chief Executive Officer
Pool Corporation Advanced Drainage Systems

Anil Seetharam
Managing Director
Berkshire Partners

10 | ADS Annual Report 2022 ADS Annual Report 2022 | 11

Advanced Drainage Systems, Inc.
4640 Trueman Blvd.
Hilliard, OH 43026
[Link]