Arcosa, Inc. Announces Completion of Cherry Companies Acquisition
January 06 2020 - 4:15PM
Business Wire
- Expands Aggregates Business into
Attractive Houston Region and Builds Leadership Position in Growing
Recycled Aggregates Market
- Provides Platform for Additional Growth
in Natural and Recycled Aggregates
- Accelerates Portfolio Shift into
Higher-Valued Construction Products Segment
Arcosa, Inc. (NYSE: ACA) (“Arcosa” or the “Company”), a provider
of infrastructure-related products and solutions, today announced
that it has closed the acquisition of Cherry Industries, Inc. and
affiliated entities (“Cherry” or “Cherry Companies”), a leading
producer of natural and recycled aggregates in the Houston, Texas
market.
As previously announced, on December 12, 2019, Arcosa entered
into a definitive agreement to acquire Cherry for $298 million.
With revenues and EBITDA of approximately $176 million and $37
million, respectively, for the trailing twelve-month period ended
September 30, 2019, Cherry adds 12 Houston locations to Arcosa’s
existing 19 active aggregate and specialty materials locations in
Texas, building out Arcosa’s footprint in a key Texas market with
healthy population growth, major highway investments, and positive
private demand drivers.
At closing, the purchase price was funded with a combination of
cash on-hand and advances under a new $150 million five-year term
loan provided by a syndicate of banks. The interest rate under the
facility, initially set at 3.4%, is variable based on LIBOR and
Arcosa’s leverage.
The acquisition is expected to be accretive to earnings in 2020.
The Company expects to provide guidance for full year 2020 when it
releases its fourth quarter and full year 2019 results in late
February 2020.
Antonio Carrillo, President and Chief Executive Officer,
commented, “We are excited to announce the completion of the Cherry
acquisition. Cherry accelerates the growth of our Construction
Products segment at an attractive price, broadens our geographic
presence into the Houston market, and provides us a new
complementary product line of recycled aggregates.
“Arcosa’s Construction Materials portfolio now includes natural
aggregates, recycled aggregates, and specialty materials, each of
which offers a platform for continued organic and acquisition
growth. We look forward to working with the experienced Cherry team
to grow in both natural and recycled aggregates, and we feel
well-positioned to benefit from continued investment in
infrastructure spending in Texas and nationwide.”
About Arcosa
Arcosa, Inc., 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,” 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 spin-off from Trinity; tax
treatment of the spin-off; failure to successfully integrate
Cherry, 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.
Reconciliation of EBITDA for Cherry(in
millions)(unaudited)
“EBITDA” is defined as Cherry’s net income plus interest
expense, income taxes, and depreciation and amortization. EBITDA is
not a calculation based on generally accepted accounting
principles. The amounts included in the EBITDA calculation,
however, are derived from amounts included in the historical
statements of operations data. In addition, EBITDA should not be
considered as an alternative to net income or operating income as
an indicator of Cherry’s operating performance, or as an
alternative to operating cash flows as a measure of liquidity. We
believe EBITDA assists investors in comparing a company’s
performance on a consistent basis without regard to depreciation
and amortization and other expenses, which can vary significantly
depending upon many factors.
EBITDA for Cherry (For the Trailing Twelve Months Ended
September 30, 2019) Net income $ 28.5
Add: Interest expense 0.1 Provision for income taxes 1.2
Depreciation and amortization expense 7.1 EBITDA $ 36.9
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version on businesswire.com: https://www.businesswire.com/news/home/20200106005872/en/
Scott C. BeasleyChief Financial Officer
Gail M. PeckSVP, Finance & Treasurer
T 972.942.6500InvestorResources@arcosa.com
David GoldADVISIRY Partners
T 212.661.2220David.Gold@advisiry.com
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