- All Three Business Segments Contribute to Double-Digit Revenue
Growth
- Adjusted EBITDA Increase of 40% Driven by Broad Infrastructure
Market Strength, Internal Operating Initiatives, and the ACG
Materials Acquisition
- Barge Orders of $92 Million Increase Backlog to $364 Million,
up 58% Year-to-Date
- Full Year 2019 Adjusted EBITDA Expected to be at Upper End of
Guidance Range of $230-$240 Million
Arcosa, Inc. (NYSE: ACA) (“Arcosa” or the “Company”), a provider
of infrastructure-related products and solutions, today announced
results for the third quarter ended September 30, 2019.
Third Quarter Highlights
- Revenues increased 18% to $445.0 million
- Net income increased to $32.7 million; Adjusted Net Income
increased 35%
- Adjusted EBITDA increased 40% to $64.9 million
- Diluted EPS increased to $0.67; Adjusted Diluted EPS up
33%
“The third quarter marked another period of considerable revenue
and profit growth for Arcosa, demonstrating our leadership
positions in important infrastructure markets, the successful
implementation of lean manufacturing initiatives, and our
acquisition strategy. We executed well on our Stage 1 priorities
during the quarter, led by continued operating improvements in our
Energy Equipment segment that drove our overall margins higher,”
commented Antonio Carrillo, President and Chief Executive
Officer.
“Additionally, I am pleased with the healthy order activity in
the quarter. Recent orders across our Energy Equipment and barge
businesses have increased our production visibility for 2020 and
demonstrate the continued strength of the infrastructure markets we
serve.
“Year-to-date revenue and EBITDA performance has set the stage
for Arcosa to achieve significant growth in our first full year as
a public company. We are pleased to reaffirm our guidance range for
Adjusted EBITDA of $230 million to $240 million for full year 2019,
noting that we expect to reach the high end of the range,” Mr.
Carrillo concluded.
Segment Results - Construction Products
- Revenues increased 60% to $115.9 million in the third quarter,
benefitting from higher volumes in the Company's legacy businesses
and the December 2018 acquisition of ACG Materials.
- Third quarter Adjusted Segment EBITDA increased $5.7 million to
$26.2 million, representing a 22.6% margin compared to a 28.2%
margin a year ago.
- Year-over-year volume growth in legacy aggregates and specialty
materials businesses demonstrates healthy underlying construction
market fundamentals in the Company's markets.
- The year-over-year margin decrease primarily resulted from the
addition of ACG Materials, which has lower margins than the legacy
businesses, softer demand from ACG aggregates plants serving oil
and gas markets, and increased production costs at the Company's
legacy operations.
Segment Results - Energy Equipment
- Third quarter revenues were up 6% year-over-year to $210.2
million, driven by higher volumes of wind towers, utility
structures, and storage tanks, as well as improved pricing in
utility structures and storage tanks.
- Adjusted Segment EBITDA increased 93% to $33.5 million,
representing a 15.9% margin compared to an 8.8% margin a year
ago.
- Margin increased from continued throughput improvements and
increased participation in the bid market. Margin in the third
quarter of 2018 was reduced by a $6.1 million inventory reserve
related to a canceled project in the utility structures
business.
- Order activity was strong during the third quarter. Segment
backlog for wind towers and utility structures increased 9% to
$563.6 million compared to the second quarter with a combined book
to bill ratio of 1.3.
- The wind towers business received orders for $89 million,
increasing production visibility for 2020. Pricing on new orders
continues to be reflective of a market transitioning from
production tax credit incentives.
Segment Results - Transportation Products
- Third quarter revenues increased 11% to $120.6 million, driven
by a 57% increase in barge revenues, but partially offset by a 27%
decline in components revenues.
- Adjusted Segment EBITDA decreased 10% to $15.9 million,
representing a margin of 13.2% compared to a 16.3% margin a year
ago.
- Compared to last year, margin declined from lower pricing on a
long-term components agreement and lower volumes of components.
Railcar component demand has declined as the North American
industry outlook for new railcar builds has softened.
- The barge business began delivering barges from its re-opened
Louisiana facility during the quarter, and margin continued to be
impacted by the delivery of barge orders taken in a weaker pricing
environment. Barge margins are expected to improve sequentially in
the fourth quarter, helping to drive higher anticipated segment
revenues and Adjusted Segment EBITDA in the fourth quarter compared
to last year.
- The barge business received orders for $92 million,
representing a book to bill ratio of 1.2 on 17% higher sequential
revenues. The orders included a healthy mix of dry and liquid
barges with pricing reflecting more robust demand. Barge backlog
totaled $363.8 million at the end of September, up 58% year-to-date
and includes approximately $260 million of production visibility
for 2020.
Capital Allocation and Liquidity
- Capital expenditures were $22.1 million in the third quarter,
bringing the year to date total to $61.0 million. The Company now
expects full year capital expenditures of $80-$85 million, up
slightly based on new organic growth projects to expand product
lines and capacity in Construction Products and utility
structures.
- During the quarter, the Company completed two bolt-on
acquisitions in the aggregates business to expand its footprint in
Texas and Louisiana, for a purchase price totaling $9.4
million.
- The Company repurchased $3.0 million, or 91,868 shares at an
average price of $32.64 during the quarter, leaving $36 million
available under the $50 million authorization approved in December
2018. The Company also declared a quarterly dividend of $0.05 per
share to be paid on October 31, 2019.
- At the end of the third quarter, cash and cash equivalents
totaled $127.5 million. Combined with unused capacity under its
credit facility, the Company had $388.8 million of available
liquidity at September 30, 2019.
2019 Guidance
The Company maintains its 2019 full year Adjusted EBITDA
guidance range of $230 million to $240 million, with emphasis on
the upper end of the range. The Company also maintains its full
year 2019 revenue guidance range of $1.75 billion to $1.80
billion.
Non-GAAP Financial Information
This earnings release contains financial measures that have not
been prepared in accordance with U.S. generally accepted accounting
principles ("GAAP"). Reconciliations of non-GAAP financial measures
to the closest GAAP measure are included in the accompanying tables
to this earnings release.
Presentation of Financials
The spin-off of the Company by Trinity Industries, Inc. (“Former
Parent”; NYSE:TRN) was completed on November 1, 2018. The Company’s
financial statements for periods prior to November 1, 2018 were
prepared on a “carve-out” basis. The carve-out financials of the
Company are not necessarily representative of the amounts that
would have been reflected in the financial statements had the
Company been an independent company during the applicable
periods.
Conference Call Information
A conference call is scheduled for 8:30 a.m. Eastern Time on
October 31, 2019 to discuss 2019 third quarter results. To listen
to the conference call webcast, please visit the Investor Relations
section of Arcosa’s website at http://ir.arcosa.com/Events. A slide
presentation for this conference call will be posted on the
Company’s website in advance of the call at
http://ir.arcosa.com/Events. The audio conference call number is
877-876-9173 for domestic callers and 785-424-1667 for
international callers. The conference ID is ARCOSA. An audio
playback will be available through 11:59 p.m. Eastern Time on
November 14, 2019, by dialing 800-839-3012 for domestic callers and
402-220-7232 for international callers. A replay of the webcast
will be available for one year on Arcosa’s website at
http://ir.arcosa.com/Events.
About Arcosa
Arcosa, Inc. (NYSE:ACA), headquartered in Dallas, Texas, is a
provider of infrastructure-related products and solutions with
leading positions in construction, energy, and transportation
markets. Arcosa reports its financial results in three principal
business segments: the Construction Products Group, the Energy
Equipment Group, and the Transportation Products Group. For more
information, visit www.arcosa.com.
Some statements in this release, which are not historical facts,
are “forward-looking statements” as defined by the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements include statements about Arcosa’s estimates,
expectations, beliefs, intentions or strategies for the future.
Arcosa uses the words “anticipates,” “assumes,” “believes,”
“estimates,” “expects,” “intends,” “forecasts,” “may,” “will,”
“should,” “guidance,” “outlook,” “vision,” and similar expressions
to identify these forward-looking statements. Forward-looking
statements speak only as of the date of this release, and Arcosa
expressly disclaims any obligation or undertaking to disseminate
any updates or revisions to any forward-looking statement contained
herein, except as required by federal securities laws.
Forward-looking statements are based on management’s current views
and assumptions and involve risks and uncertainties that could
cause actual results to differ materially from historical
experience or our present expectations, including but not limited
to assumptions, risks and uncertainties regarding achievement of
the expected benefits of Arcosa’s separation from Trinity
Industries, Inc.; tax treatment of the separation; failure to
successfully integrate the ACG Materials acquisition, or failure to
achieve the expected benefits of the acquisition; market conditions
and customer demand for Arcosa’s business products and services;
the cyclical nature of, and seasonal or weather impact on, the
industries in which Arcosa competes; competition and other
competitive factors; governmental and regulatory factors; changing
technologies; availability of growth opportunities; market
recovery; improving margins; and Arcosa’s ability to execute its
long-term strategy, and such forward-looking statements are not
guarantees of future performance. For further discussion of such
risks and uncertainties, see "Risk Factors" and the
"Forward-Looking Statements" section of "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in
Arcosa's Form 10-K for the year-ended December 31, 2018, as may be
revised and updated by Arcosa's Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K.
Arcosa, Inc.
Condensed Consolidated and Combined
Statements of Operations
(in millions, except per share
amounts)
(unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Revenues
$
445.0
$
378.6
$
1,290.0
$
1,086.0
Operating costs:
Cost of revenues
356.7
308.9
1,035.2
877.5
Selling, engineering, and administrative
expenses
45.5
40.1
132.4
117.1
Impairment charge
—
23.2
—
23.2
402.2
372.2
1,167.6
1,017.8
Operating profit
42.8
6.4
122.4
68.2
Interest expense
1.6
—
5.1
—
Other, net (income) expense
(0.7
)
(0.2
)
(1.0
)
2.0
0.9
(0.2
)
4.1
2.0
Income before income taxes
41.9
6.6
118.3
66.2
Provision for income taxes
9.2
3.4
26.1
18.2
Net income
$
32.7
$
3.2
$
92.2
$
48.0
Net income per common share:
Basic
$
0.68
$
0.07
$
1.91
$
0.98
Diluted
$
0.67
$
0.07
$
1.89
$
0.98
Weighted average number of shares
outstanding(1):
Basic
47.9
48.8
47.8
48.8
Diluted
48.3
48.8
48.3
48.8
(1) For periods prior to the separation,
the denominator for basic and diluted net income per common share
was calculated using the 48.8 million shares of common stock
outstanding immediately following the separation.
Arcosa, Inc.
Condensed Segment Data
(in millions)
(unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
Revenues:
2019
2018
2019
2018
Construction aggregates
$
96.9
$
52.9
$
278.5
$
166.6
Other
19.0
19.7
59.0
60.1
Construction Products Group
115.9
72.6
337.5
226.7
Wind towers and utility structures
159.8
147.0
469.4
427.5
Other
50.4
51.4
154.2
145.6
Energy Equipment Group
210.2
198.4
623.6
573.1
Inland barges
77.5
49.3
193.0
123.0
Steel components
43.1
59.2
140.4
166.3
Transportation Products Group
120.6
108.5
333.4
289.3
Segment Totals before Eliminations
446.7
379.5
1,294.5
1,089.1
Eliminations
(1.7
)
(0.9
)
(4.5
)
(3.1
)
Consolidated and Combined Total
$
445.0
$
378.6
$
1,290.0
$
1,086.0
Three Months Ended September
30,
Nine Months Ended September
30,
Operating profit (loss):
2019
2018
2019
2018
Construction Products Group
$
16.5
$
15.3
$
45.3
$
45.3
Energy Equipment Group
26.6
(13.2
)
79.8
12.5
Transportation Products Group
11.2
13.5
32.1
35.2
All Other
—
(0.1
)
—
(0.1
)
Segment Totals before Corporate
Expenses
54.3
15.5
157.2
92.9
Corporate
(11.5
)
(9.1
)
(34.8
)
(24.7
)
Consolidated and Combined Total
$
42.8
$
6.4
$
122.4
$
68.2
Backlog:
September 30, 2019
September 30, 2018
Energy Equipment Group:
Wind towers and utility structures
$
563.6
$
700.3
Other
$
44.3
$
83.5
Transportation Products Group:
Inland barges
$
363.8
$
210.4
Arcosa, Inc.
Condensed Consolidated Balance
Sheets
(in millions)
(unaudited)
September 30, 2019
December 31, 2018
Current assets:
Cash and cash equivalents
$
127.5
$
99.4
Receivables, net of allowance
213.4
291.4
Inventories
306.1
252.5
Other
27.4
24.1
Total current assets
674.4
667.4
Property, plant, and equipment, net
815.0
803.0
Goodwill
626.6
615.2
Deferred income taxes
7.7
6.9
Other assets
94.3
79.7
$
2,218.0
$
2,172.2
Current liabilities:
Accounts payable
$
82.6
$
86.2
Accrued liabilities
140.1
121.5
Current portion of long-term debt
1.1
1.8
Total current liabilities
223.8
209.5
Debt
106.4
183.7
Deferred income taxes
63.2
58.3
Other liabilities
59.0
36.2
452.4
487.7
Stockholders' equity:
Common stock
0.5
0.5
Capital in excess of par value
1,684.6
1,685.7
Retained earnings
104.3
19.5
Accumulated other comprehensive loss
(20.6
)
(17.7
)
Treasury stock
(3.2
)
(3.5
)
1,765.6
1,684.5
$
2,218.0
$
2,172.2
Arcosa, Inc.
Condensed Consolidated and Combined
Cash Flow Statements
(in millions)
(unaudited)
Nine Months Ended September
30,
2019
2018
Operating activities:
Net income
$
92.2
$
48.0
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, and
amortization
63.2
49.7
Impairment charge
—
23.2
Stock-based compensation expense
11.1
7.5
Provision for deferred income taxes
14.9
7.1
Changes in current assets and
liabilities
39.5
(29.2
)
Gains on dispositions of property and
other assets
(2.6
)
(1.2
)
(Increase) decrease in other assets
0.2
3.6
Increase (decrease) in other
liabilities
2.4
3.8
Other
(1.9
)
6.0
Net cash provided by operating
activities
219.0
118.5
Investing activities:
Proceeds from dispositions of property and
other assets
4.7
2.6
Capital expenditures
(61.0
)
(33.0
)
Acquisitions, net of cash acquired
(31.1
)
(25.0
)
Net cash required by investing
activities
(87.4
)
(55.4
)
Financing activities:
Payments to retire debt
(81.0
)
(0.1
)
Shares repurchased
(11.0
)
—
Dividends paid to common stockholders
(7.4
)
—
Purchase of shares to satisfy employee tax
on vested stock
(4.1
)
—
Net transfers to Former Parent and
affiliates
—
(56.3
)
Other
—
(3.1
)
Net cash required by financing
activities
(103.5
)
(59.5
)
Net increase in cash and cash
equivalents
28.1
3.6
Cash and cash equivalents at beginning of
period
99.4
6.8
Cash and cash equivalents at end of
period
$
127.5
$
10.4
Arcosa, Inc. Reconciliation of Consolidated and Combined
Adjusted EBITDA ($ in millions) (unaudited)
GAAP does not define “Earnings Before Interest, Taxes,
Depreciation, Depletion and Amortization” (“EBITDA”) and it should
not be considered as an alternative to earnings measures defined by
GAAP, including net income. We use this metric to assess the
operating performance of our consolidated business, as a metric for
incentive-based compensation, and as a basis for strategic planning
and forecasting as we believe that it closely correlates to
long-term shareholder value, and we believe this metric also
assists investors in comparing a company's performance on a
consistent basis without regard to depreciation, depletion, and
amortization, which can vary significantly depending on many
factors. We adjust consolidated EBITDA for certain non-routine
items (“Adjusted EBITDA”) to provide a more consistent comparison
of earnings performance from period to period, which we also
believe assists investors in comparing a company's performance on a
consistent basis. “Adjusted EBITDA Margin” is defined as Adjusted
EBITDA divided by Revenues.
Three Months Ended September
30,
Nine Months Ended September
30,
Full Year 2019
Guidance
2019
2018
2019
2018
Low
High
Revenues
$
445.0
$
378.6
$
1,290.0
$
1,086.0
$
1,750.0
$
1,800.0
Net income
32.7
3.2
92.2
48.0
101.0
113.0
Add:
Interest expense, net
1.3
—
4.1
—
5.0
5.0
Provision for income taxes
9.2
3.4
26.1
18.2
30.0
33.0
Depreciation, depletion, and amortization
expense
21.7
16.8
63.2
49.7
92.0
87.0
EBITDA
64.9
23.4
185.6
115.9
228.0
238.0
Add:
Impairment charge
—
23.2
—
23.2
—
—
Impact of the fair value mark up of
acquired inventory
0.4
—
2.0
—
2.0
2.0
Other, net (income) expense(1)
(0.4
)
(0.2
)
—
2.0
—
—
Adjusted EBITDA
$
64.9
$
46.4
$
187.6
$
141.1
$
230.0
$
240.0
Adjusted EBITDA Margin
14.6
%
12.3
%
14.5
%
13.0
%
13.1
%
13.3
%
(1) Included in Other, net expense was the
impact of foreign currency exchange transactions of $(0.3) million
and $0.0 million for the three months ended September 30, 2019 and
2018, respectively, and $0.7 million and $2.2 million for the nine
months ended September 30, 2019 and 2018, respectively. Since these
amounts were not included as adjustments to EBITDA prior to
December 31, 2018, Adjusted EBITDA and Adjusted EBITDA Margin for
the three and nine months ended September 30, 2018 do not agree to
amounts previously reported.
Arcosa, Inc. Reconciliation of Adjusted Segment EBITDA ($
in millions) (unaudited)
“Segment EBITDA” is defined as segment operating profit plus
depreciation, depletion, and amortization. GAAP does not define
Segment EBITDA and it should not be considered as an alternative to
earnings measures defined by GAAP, including segment operating
profit. We use this metric to assess the operating performance of
our businesses, as a metric for incentive-based compensation, and
as a basis for strategic planning and forecasting as we believe
that it closely correlates to long-term shareholder value, and we
believe this metric also assists investors in comparing a company's
performance on a consistent basis without regard to depreciation,
depletion, and amortization, which can vary significantly depending
on many factors. We adjust Segment EBITDA for certain non-routine
items (“Adjusted Segment EBITDA”) to provide a more consistent
comparison of earnings performance from period to period, which we
also believe assists investors in comparing a company's performance
on a consistent basis. "Adjusted Segment EBITDA Margin" is defined
as Adjusted Segment EBITDA divided by Revenues.
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Construction Products
Revenues
$
115.9
$
72.6
$
337.5
$
226.7
Operating Profit
16.5
15.3
45.3
45.3
Add: Depreciation, depletion, and
amortization expense
9.7
5.2
27.5
15.4
Segment EBITDA
26.2
20.5
72.8
60.7
Add: Impact of the fair value mark up of
acquired inventory
—
—
1.4
—
Adjusted Segment EBITDA
$
26.2
$
20.5
$
74.2
$
60.7
Adjusted Segment EBITDA Margin
22.6
%
28.2
%
22.0
%
26.8
%
Energy Equipment
Revenues
$
210.2
$
198.4
$
623.6
$
573.1
Operating Profit
26.6
(13.2
)
79.8
12.5
Add: Depreciation and amortization
expense
6.9
7.4
21.2
22.6
Segment EBITDA
33.5
(5.8
)
101.0
35.1
Add: Impairment charge
—
23.2
—
23.2
Adjusted Segment EBITDA
$
33.5
$
17.4
$
101.0
$
58.3
Adjusted Segment EBITDA Margin
15.9
%
8.8
%
16.2
%
10.2
%
Transportation Products
Revenues
$
120.6
$
108.5
$
333.4
$
289.3
Operating Profit
11.2
13.5
32.1
35.2
Add: Depreciation and amortization
expense
4.3
4.2
12.0
11.7
Segment EBITDA
15.5
17.7
44.1
46.9
Add: Impact of the fair value mark up of
acquired inventory
0.4
—
0.6
—
Adjusted Segment EBITDA
$
15.9
$
17.7
$
44.7
$
46.9
Adjusted Segment EBITDA Margin
13.2
%
16.3
%
13.4
%
16.2
%
Operating Profit - All Other
$
—
$
(0.1
)
$
—
$
(0.1
)
Operating Profit (loss) - Corporate
(11.5
)
(9.1
)
(34.8
)
(24.7
)
Add: Corporate depreciation expense
0.8
—
2.5
—
Adjusted EBITDA
$
64.9
$
46.4
$
187.6
$
141.1
Arcosa, Inc. Reconciliation of Adjusted Net Income and
Adjusted Diluted EPS (unaudited)
GAAP does not define “Adjusted Net Income” and it should not be
considered as an alternative to earnings measures defined by GAAP,
including net income. We use this metric to assess the operating
performance of our consolidated business. We adjust net income for
certain non-routine items to provide investors with what we believe
is a more consistent comparison of earnings performance from period
to period.
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
(in millions)
Net Income
$
32.7
$
3.2
$
92.2
$
48.0
Impairment charge on businesses
subsequently divested
—
23.2
—
23.2
Tax impact
—
(1.2
)
—
(1.2
)
Impact of the fair value mark up of
acquired inventory
0.4
—
2.0
—
Tax impact
(0.1
)
—
(0.5
)
—
Impact of U.S. tax reform
—
(0.7
)
—
(0.7
)
Adjusted Net Income
$
33.0
$
24.5
$
93.7
$
69.3
GAAP does not define “Adjusted Diluted EPS” and it should not be
considered as an alternative to earnings measures defined by GAAP,
including diluted EPS. We use this metric to assess the operating
performance of our consolidated business. We adjust diluted EPS for
certain non-routine items to provide investors with what we believe
is a more consistent comparison of earnings performance from period
to period.
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
(in dollars per share)
Diluted EPS
$
0.67
$
0.07
$
1.89
$
0.98
Impairment charge on businesses
subsequently divested
—
0.46
—
0.46
Impact of the fair value mark up of
acquired inventory
0.01
—
0.03
—
Impact of U.S. tax reform
—
(0.02
)
—
(0.02
)
Adjusted Diluted EPS
$
0.68
$
0.51
$
1.92
$
1.42
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version on businesswire.com: https://www.businesswire.com/news/home/20191030005883/en/
Scott C. Beasley Chief Financial Officer Gail M. Peck SVP,
Finance & Treasurer T 972.942.6500
InvestorResources@arcosa.com
David Gold ADVISIRY Partners T 212.661.2220
David.Gold@advisiry.com
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