- Construction Products and
Transportation Products Post Higher Revenues and Operating
Profit
- Announces plans to re-open idled barge
facility
Arcosa, Inc. (NYSE: ACA) (“Arcosa” or the “Company”), a
manufacturer of infrastructure-related products and services, today
announced earnings results for the third quarter ended September
30, 2018.
Third Quarter Highlights
- Revenues of $378.6 million were up 3.5%
year-on-year, led by Construction Products and Transportation
Products
- Net income was $3.2 million, inclusive
of a previously-announced $23.2 million pre-tax impairment charge
in the Energy Equipment Group, compared with $20.6 million in
2017
- EBITDA was $46.6 million, compared to
$50.5 million in 2017
- Construction Products and
Transportation Products posted higher revenues and operating
profit
- Within Transportation Products, results
for the inland barge business continued to reflect early signs of
an industry recovery, receiving $61.3 million of orders and posting
a book-to-bill ratio of 1.24 during the quarter
- Year-to-date operating cash flow was
$118.5 million
CEO Comments
Arcosa President and CEO, Antonio Carrillo, commented, “Third
quarter results were in line with our expectations and support the
growth strategy we have put in place across our three business
segments. Both Construction Products and Transportation Products
posted higher revenues and operating profit in the third
quarter.
“In Construction Products, growth in our lightweight aggregates
and trench shoring businesses more than offset the impact of
challenging weather conditions on our aggregates business in
Texas.
“In Transportation Products, higher inland barge revenues,
increased backlog, and strong order and quoting activity are signs
of an early recovery underway in the barge market and support our
recent decision to re-open one of our two idled facilities.
“Energy Equipment results were substantially reduced by a
one-time impairment charge resulting from our decision, announced
in early October, to divest several sub-scale businesses. These
businesses have now been divested, and while the cash proceeds from
the transactions were immaterial, the divestitures will eliminate
ongoing operating losses. Additionally, the segment’s results were
affected by planned lower volumes in our wind towers product line
as part of a long term supply agreement, as well as a $6.1 million
inventory reserve related to a canceled project for a single
customer in our utility structures business. During the quarter,
our utility structures business recovered from production
inefficiencies related to an order for a new product type that
hampered our throughput in the second quarter and early part of the
third quarter.
“Moving forward, the new structure of Energy Equipment will
enhance our focus on the higher potential platform businesses in
the segment: utility structures, wind towers, storage tanks, and we
are rolling out plans to replicate the continuous improvements
programs of the wind towers business across our utility structures
and storage tank product lines.
“We remain focused on our stage one priorities: growing our
Construction Products businesses, improving margins in our Energy
Equipment segment, and expanding our Transportation Products
businesses as our key markets recover.”
Mr. Carrillo concluded, “In that context, we are pleased to have
reached a definitive agreement with an affiliate of H.I.G. Capital,
LLC to acquire the ACG Materials business for approximately $315
million, which we announced today in a separate release. ACG
Materials is a producer of specialty materials and aggregates in
the United States and Canada and is expected to be a strong
strategic addition to Arcosa’s Construction Products segment.”
Additional notes on Financial Results
- The Company reported a higher effective
tax rate of 51.5% during the third quarter compared to 39.1% last
year, primarily due to the non-deductibility of a portion of the
impairment charge in the Energy Equipment segment
- Throughout the three and nine months
ended September 30, 2018, Arcosa operated as part of Trinity
Industries, Inc. (NYSE: TRN) (“Trinity”). Consequently, Trinity's
net investment in Arcosa's operations (Parent Equity) is shown in
lieu of stockholders' equity, as there were no reported Arcosa
shares outstanding as of September 30, 2018
- On November 1, 2018, Arcosa’s tax-free
separation from Trinity was successfully completed and “regular
way” trading in the Company’s shares began on the New York Stock
Exchange under the ticker symbol “ACA”. At November 1, 2018, the
Company reported approximately 48.8 million shares outstanding
- In connection with the separation, on
October 31, 2018, Trinity contributed $200 million cash to Arcosa.
In addition, the Company has announced that it has executed a $400
million unsecured, five-year credit facility
Conference Call Information
A conference call is scheduled for 5:30 p.m. Eastern
time today to discuss the acquisition and the Company’s
earnings results for the third quarter ended September 30, 2018. A
slide presentation for this conference call will be posted on the
Company’s website
at http://ir.arcosa.com/Events approximately 15 minutes
before the start of the call. The conference call number
is 866-831-8711 for domestic callers
and 203-518-9865 for international callers. The
conference ID is ARCOSA. An audio playback will be available
through 11:59 p.m. Eastern time on November 28,
2018, by dialing 800-839-9719 for domestic callers
and 402-220-6091 for international callers. A live audio
webcast of the conference call with a slide presentation will be
available to the public and a replay will be available after the
call by visiting Arcosa’s website
at http://ir.arcosa.com/Events.
About Arcosa
Arcosa, Inc., headquartered in Dallas, Texas, is a
manufacturer of infrastructure-related products and services 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; inability to consummate the ACG
Materials acquisition within the expected time periods or at all,
failure to successfully integrate ACG Materials, 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 “Information Statement Summary”, “Risk
Factors” and “Forward-Looking Statements” in the information
statement filed as an exhibit to Arcosa’s Registration Statement on
Form 10, as amended.
Arcosa, Inc.
Combined Statements of Comprehensive Income
(in millions)
(unaudited)
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, 2018 2017
2018 2017 Revenues
$
378.6 $ 365.9
$ 1,086.0 $ 1,114.9 Operating
costs: Cost of revenues
308.9 290.4
877.5 885.7
Selling, engineering, and administrative expenses
40.1 41.9
117.1 120.6 Impairment charge
23.2
—
23.2 —
372.2 332.3
1,017.8
1,006.3 Operating profit
6.4 33.6
68.2
108.6 Other, net (income) expense
(0.2
) (0.2 )
2.0 — Income
before income taxes
6.6 33.8
66.2 108.6
Provision for income taxes
3.4
13.2
18.2 42.5 Net
income
3.2 20.6
48.0 66.1 Other comprehensive income
(loss)
(0.1 ) (0.8 )
0.4
(1.4 ) Comprehensive income
$ 3.1 $
19.8
$ 48.4 $ 64.7
Our effective tax rate reflects the Company's estimate for its
state income tax expense, excess tax benefits or deficiencies
related to equity compensation, and the impact of nondeductible
impairment charges. A portion of the $23.2 million pre-tax
impairment charge recorded in the three and nine months ended
September 30, 2018 was attributable to certain of our foreign
operations for which taxes are not provided. This impairment charge
increased the losses in those jurisdictions with no corresponding
tax benefit.
The Tax Cuts and Jobs Act (the "Act"), enacted in December 2017,
reduced the U.S. federal corporate income tax rate from 35.0% to
21.0%. In December 2017, we recorded a tax benefit after the
initial assessment of the tax effects of the Act, and we will
continue refining this amount throughout 2018, which could
potentially affect the measurement of our deferred tax balance or
give rise to new deferred tax amounts in a final adjustment in the
fourth quarter of 2018. The impact of the Act may differ from our
estimate due to changes in the regulations, rulings, guidance, and
interpretations issued by the IRS and the FASB as well as
interpretations and assumptions made by the Company.
Arcosa, Inc. Condensed
Segment Data
(in millions)
(unaudited)
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, Revenues: 2018
2017 2018 2017
Construction Products Group
$ 72.6 $ 69.4
$
226.7 $ 194.8 Energy Equipment Group
198.4 217.3
573.1 651.3 Transportation Products Group
108.5 80.5
289.3 272.1 All Other
— —
— — Segment Totals before
Eliminations
379.5 367.2
1,089.1 1,118.2 Eliminations
(0.9 ) (1.3 )
(3.1
) (3.3 ) Combined Total
$ 378.6
$ 365.9
$ 1,086.0 $ 1,114.9
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, Operating profit (loss):
2018 2017 2018 2017 Construction
Products Group
$ 15.3 $ 13.6
$ 45.3 $
42.5 Energy Equipment Group
(13.2 ) 20.8
12.5
63.2 Transportation Products Group
13.5 9.8
35.2 30.9
All Other
(0.1 ) —
(0.1 ) — Segment Totals before
Eliminations and Corporate Expenses
15.5 44.2
92.9
136.6 Corporate
(9.1 ) (10.6 )
(24.7 )
(28.0 ) Eliminations
— —
— — Combined Total
$ 6.4
$ 33.6
$ 68.2 $ 108.6
Backlog:
September 30,2018 September
30,2017 Wind towers and utility structures
$
700.3 $ 972.0 Inland barges
$ 210.4 $ 126.0
Arcosa, Inc.
Condensed Combined Balance Sheets
(in millions)
(unaudited)
September 30,2018 December
31,2017 Current assets: Cash and cash equivalents
$ 10.4 $ 6.8 Receivables, net of allowance
174.7 165.3 Inventories
234.7 246.8 Other
30.0 9.9 Total current assets
449.8 428.8 Property, plant, and equipment, net
570.5 583.1 Goodwill
504.0 494.3 Deferred income
taxes
8.8 8.8 Other assets
76.9
87.5
$ 1,610.0 $ 1,602.5 Current
liabilities: Accounts payable
$ 60.9 $ 56.0 Accrued
liabilities
109.1 118.0 Current portion of long-term debt
0.1 0.1 Total current
liabilities
170.1 174.1 Debt
0.3 0.4 Deferred
income taxes
16.8 11.0 Other liabilities
19.7
9.1
206.9 194.6 Parent equity:
Net parent investment
1,422.5 1,427.7 Accumulated other
comprehensive loss
(19.4 ) (19.8 )
1,403.1 1,407.9
$
1,610.0 $ 1,602.5
Arcosa, Inc. Condensed Combined Cash Flow Statements
(in millions)
(unaudited)
Nine Months EndedSeptember 30, 2018
2017 Operating activities: Net income
$ 48.0 $ 66.1 Adjustments to reconcile net income to
net cash provided by operating activities: Depreciation and
amortization
49.7 48.2 Impairment charge
23.2 —
Provision (benefit) for deferred income taxes
7.1 12.4
Changes in current assets and liabilities
(29.2 )
12.0 Other
19.7 (4.4 ) Net cash
provided by operating activities
118.5
134.3
Investing activities: Proceeds from
dispositions of property and other assets
2.6 2.1 Capital
expenditures
(33.0 ) (45.9 ) Acquisitions, net of
cash acquired
(25.0 ) (47.5 ) Net cash
required by investing activities
(55.4 )
(91.3 )
Financing activities: Payments to retire debt
(0.1 ) (0.1 ) Proceeds from issuance of debt
—
0.6 Net transfers from/(to) parent and affiliates
(56.3
) (47.3 ) Holdback payment from acquisition
(3.1 ) — Net cash required by financing
activities
(59.5 ) (46.8 ) Net increase
(decrease) in cash and cash equivalents
3.6 (3.8 ) Cash and
cash equivalents at beginning of period
6.8
14.0 Cash and cash equivalents at end of period
$ 10.4 $ 10.2
Arcosa, Inc.Reconciliation of EBITDA(in
millions)(unaudited)
“EBITDA” is defined as net income plus interest expense, income
taxes, and depreciation and amortization, including non-cash
impairment charges. "EBITDA Margin" is defined as Adjusted EBITDA
divided by Revenue. EBITDA is not a calculation based on generally
accepted accounting principles. The amounts included in the EBITDA
calculation are, however, 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 our 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, which can vary significantly
depending upon many factors.
Three Months
EndedSeptember 30, Nine Months EndedSeptember
30, 2018 2017 2018
2017 Revenues
$ 378.6 $ 365.9
$
1,086.0 $ 1,114.9 Net income
3.2 20.6
48.0 66.1 Add: Interest expense
— —
— —
Provision for income taxes
3.4 13.2
18.2 42.5
Depreciation and amortization expense
16.8 16.7
49.7
48.2 Impairment charge
23.2 —
23.2 — EBITDA
$
46.6 $ 50.5
$ 139.1 $
156.8 EBITDA Margin
12.3 % 13.8 %
12.8
% 14.1 %
Arcosa, Inc.Reconciliation of Adjusted EBITDA by
Segment(in millions)(unaudited)
“Adjusted EBITDA” is defined as segment operating profit plus
depreciation and amortization including non-cash impairment
charges. "Adjusted EBITDA Margin" is defined as Adjusted EBITDA
divided by Revenue. Since income taxes and interest expense are not
allocated to the segment level, they are not added back in the
calculation of Adjusted EBITDA. For a reconciliation of EBITDA to
net income, see the accompanying EBITDA reconciliation. Adjusted
EBITDA is not a calculation based on generally accepted accounting
principles. The amounts included in the Adjusted EBITDA calculation
are, however, derived from amounts included in the historical
statements of operations data. In addition, Adjusted EBITDA should
not be considered as an alternative to net income or operating
income as an indicator of our operating performance, or as an
alternative to operating cash flows as a measure of liquidity. We
believe Adjusted EBITDA assists investors in comparing a company’s
performance on a consistent basis without regard to depreciation
and amortization, which can vary significantly depending upon many
factors.
Three Months
EndedSeptember 30, Nine Months EndedSeptember
30, 2018 2017 2018
2017 Construction Products Segment Revenues
$ 72.6 $ 69.4
$ 226.7 $ 194.8
Operating Profit
15.3 13.6
45.3 42.5 Add:
Depreciation and amortization expense
5.2
4.7
15.4 13.3
Adjusted EBITDA
$ 20.5 $ 18.3
$ 60.7 $
55.8 Adjusted EBITDA Margin
28.2 % 26.4 %
26.8
% 28.6 %
Energy Equipment Segment Revenues
$ 198.4 $ 217.3
$ 573.1 $ 651.3
Operating Profit
(13.2 ) 20.8
12.5 63.2 Add:
Depreciation and amortization expense
7.4 7.5
22.6
22.7 Add: Impairment charge
23.2 —
23.2 — Adjusted EBITDA
$ 17.4 $ 28.3
$ 58.3 $ 85.9 Adjusted
EBITDA Margin
8.8 % 13.0 %
10.2 % 13.2
%
Transportation Products Segment Revenues
$
108.5 $ 80.5
$ 289.3 $ 272.1 Operating
Profit
13.5 9.8
35.2 30.9 Add: Depreciation and
amortization expense
4.2 4.5
11.7 12.2 Adjusted EBITDA
$ 17.7 $ 14.3
$ 46.9 $ 43.1 Adjusted
EBITDA Margin
16.3 % 17.8 %
16.2 % 15.8
% Operating Profit - All Other
$ (0.1 )
$ —
$ (0.1 ) $ — Operating Profit - Corporate
(9.1 ) (10.6 )
(24.7 ) (28.0 ) Other,
net expense
(0.2 ) (0.2 )
2.0 — Add: Interest
expense
— —
—
— EBITDA
$ 46.6 $ 50.5
$ 139.1 $ 156.8
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181114005889/en/
Scott C. BeasleyChief Financial OfficerGail M. PeckSVP, Finance
& TreasurerT 972.942.6500InvestorResources@arcosa.com
David GoldADVISIRY PartnersT
212.661.2220David.Gold@advisiry.com
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