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Arcosa, Inc. Announces First Quarter 2020 Results and Provides Business Update

April 28, 2020 4:15 PM

DALLAS--(BUSINESS WIRE)-- Arcosa, Inc. (NYSE: ACA) (“Arcosa,” the “Company,” “We,” or “Our”), a provider of infrastructure-related products and solutions, today announced results for the first quarter ended March 31, 2020 and provided a business update.

First Quarter Highlights

COVID-19 Update

“Above all else, we are committed to the health and safety of our employees and the communities in which we operate,” noted Antonio Carrillo, President and Chief Executive Officer. “Our facilities are following the highest standards of health and safety, as we continue to produce products that are critical for North American infrastructure.”

Commenting on first quarter performance, Carrillo said, “Our first quarter results demonstrate Arcosa's outstanding earnings power when infrastructure markets are strong. Our Construction Products businesses had an excellent quarter, with the Cherry acquisition exceeding our expectations. Energy Equipment executed very well, and our Barge business continued to ramp up to meet higher levels of demand.

“Our experienced management team has led our businesses through numerous cycles. As the macroeconomic outlook changed during the quarter, we responded quickly to conserve cash by minimizing non-essential capital expenditures, tightening our working capital management around receivables, payables, and inventory, and reducing our SG&A spending. We will continue to take appropriate actions on our cost structure.

“We have entered this period of economic uncertainty in a strong financial position. We have low leverage, ample liquidity, and a lean operating model to respond quickly to changes in demand. Our strong balance sheet will help us manage through this crisis and seek disciplined acquisition opportunities, where appropriate. I am extremely proud of our team’s dedication and resilience during this challenging period.”

First Quarter 2020 Results and Commentary

Construction Products

Energy Equipment

Transportation Products

Cash Flow and Liquidity

2020 Outlook

As demonstrated by our strong first quarter performance, we were on track to meet our full year 2020 Revenue and Adjusted EBITDA guidance. In addition, our backlog businesses benefit from solid production visibility, and 2020 expectations for these businesses remain largely unchanged. However, given the macroeconomic uncertainty from COVID-19 and the unknown duration and impact of the slowdown, we are withdrawing our 2020 Revenue and Adjusted EBITDA guidance.

We will discuss our 2020 outlook in additional detail on our conference call tomorrow. The key points include:

Construction Products

Energy Equipment

Transportation Products

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.

Conference Call Information

A conference call is scheduled for 8:30 a.m. Eastern Time on April 29, 2020 to discuss 2020 first quarter results. To listen to the conference call webcast, please visit the Investor Relations section of Arcosa’s website at https://ir.arcosa.com. A slide presentation for this conference call will be posted on the Company’s website in advance of the call at https://ir.arcosa.com. The audio conference call number is 877-876-9174 for domestic callers and 785-424-1669 for international callers. The conference ID is ARCOSA. An audio playback will be available through 11:59 p.m. Eastern Time on May 13, 2020, by dialing 800-839-1180 for domestic callers and 402-220-0400 for international callers. A replay of the webcast will be available for one year on Arcosa’s website at https://ir.arcosa.com/news-events/events-presentations.

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,” “strategy,” 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 the impact of the COVID-19 pandemic on Arcosa’s customer demand for Arcosa’s products and services, Arcosa’s supply chain, Arcosa’s employees ability to work because of COVID-19 related illness, the health and safety of our employees, the effect of governmental regulations imposed in response to the COVID-19 pandemic; 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; ability to improve 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, 2019, Arcosa's Form 10-Q for the quarter-ended March 31, 2020 to be filed on or about April 29, 2020, and as may be revised and updated by Arcosa's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

TABLES TO FOLLOW

Arcosa, Inc.

Condensed Consolidated Statements of Operations

(in millions, except per share amounts)

(unaudited)

Three Months Ended
March 31,

2020

2019

Revenues

$

488.2

$

410.9

Operating costs:

Cost of revenues

391.3

332.8

Selling, general, and administrative expenses

51.8

40.8

443.1

373.6

Operating profit

45.1

37.3

Interest expense

3.3

1.9

Other, net (income) expense

(0.2)

(0.2)

3.1

1.7

Income before income taxes

42.0

35.6

Provision for income taxes

10.4

7.9

Net income

$

31.6

$

27.7

Net income per common share:

Basic

$

0.65

$

0.57

Diluted

$

0.65

$

0.56

Weighted average number of shares outstanding:

Basic

47.8

47.9

Diluted

48.4

48.5

Arcosa, Inc.

Condensed Segment Data

(in millions)

(unaudited)

Three Months Ended
March 31,

Revenues:

2020

2019

Construction aggregates

$

132.1

$

88.4

Other

17.3

17.6

Construction Products Group

149.4

106.0

Wind towers and utility structures

176.4

158.6

Other

46.8

50.5

Energy Equipment Group

223.2

209.1

Inland barges

89.0

49.4

Steel components

28.0

48.1

Transportation Products Group

117.0

97.5

Segment Totals before Eliminations

489.6

412.6

Eliminations

(1.4)

(1.7)

Consolidated Total

$

488.2

$

410.9

Three Months Ended
March 31,

Operating profit (loss):

2020

2019

Construction Products Group

$

16.8

$

11.3

Energy Equipment Group

24.9

28.2

Transportation Products Group

14.3

8.3

Segment Totals before Corporate Expenses

56.0

47.8

Corporate

(10.9)

(10.5)

Consolidated Total

$

45.1

$

37.3

Backlog:

March 31, 2020

March 31, 2019

Energy Equipment Group:

Wind towers and utility structures

$

475.6

$

549.2

Other

$

29.0

$

53.0

Transportation Products Group:

Inland barges

$

348.3

$

383.9

Arcosa, Inc.

Condensed Consolidated Balance Sheets

(in millions)

(unaudited)

March 31, 2020

December 31, 2019

Current assets:

Cash and cash equivalents

$

200.7

$

240.4

Receivables, net of allowance

238.1

200.0

Inventories

303.4

283.3

Other

29.8

33.5

Total current assets

772.0

757.2

Property, plant, and equipment, net

891.7

816.2

Goodwill

752.7

621.9

Deferred income taxes

15.4

14.3

Other assets

189.8

92.9

$

2,621.6

$

2,302.5

Current liabilities:

Accounts payable

$

113.2

$

90.0

Accrued liabilities

99.7

119.4

Advance billings

61.5

70.9

Current portion of long-term debt

4.6

3.7

Total current liabilities

279.0

284.0

Debt

352.3

103.6

Deferred income taxes

98.7

66.4

Other liabilities

75.6

58.1

805.6

512.1

Stockholders' equity:

Common stock

0.5

0.5

Capital in excess of par value

1,690.5

1,686.7

Retained earnings

152.0

122.9

Accumulated other comprehensive loss

(24.0)

(19.7)

Treasury stock

(3.0)

—

1,816.0

1,790.4

$

2,621.6

$

2,302.5

Arcosa, Inc.

Consolidated Statements of Cash Flows

(in millions)

(unaudited)

Three Months Ended
March 31,

2020

2019

Operating activities:

Net income

$

31.6

$

27.7

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion, and amortization

26.8

19.8

Stock-based compensation expense

3.7

3.4

Provision for deferred income taxes

3.2

3.4

Gains on dispositions of property and other assets

(0.8)

(0.4)

(Increase) decrease in other assets

(2.4)

(1.2)

Increase (decrease) in other liabilities

0.2

1.9

Other

2.0

(1.2)

Changes in current assets and liabilities:

(Increase) decrease in receivables

(7.2)

85.2

(Increase) decrease in inventories

(7.9)

(17.5)

(Increase) decrease in other current assets

7.8

1.6

Increase (decrease) in accounts payable

14.0

(6.9)

Increase (decrease) in advance billings

(9.4)

(0.1)

Increase (decrease) in accrued liabilities

(20.1)

9.3

Net cash provided by operating activities

41.5

125.0

Investing activities:

Proceeds from dispositions of property and other assets

5.1

0.7

Capital expenditures

(21.1)

(18.0)

Acquisitions, net of cash acquired

(309.4)

—

Net cash required by investing activities

(325.4)

(17.3)

Financing activities:

Payments to retire debt

(0.3)

(80.4)

Proceeds from issuance of debt

250.2

—

Shares repurchased

(2.0)

(6.0)

Dividends paid to common stockholders

(2.5)

(2.5)

Purchase of shares to satisfy employee tax on vested stock

—

(0.2)

Other

(1.2)

—

Net cash provided (required) by financing activities

244.2

(89.1)

Net increase (decrease) in cash and cash equivalents

(39.7)

18.6

Cash and cash equivalents at beginning of period

240.4

99.4

Cash and cash equivalents at end of period

$

200.7

$

118.0

Arcosa, Inc.
Reconciliation of Adjusted EBITDA and Adjusted Net Income
($ 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
March 31,

2020

2019

Revenues

$

488.2

$

410.9

Net income

31.6

27.7

Add:

Interest expense, net

3.1

1.6

Provision for income taxes

10.4

7.9

Depreciation, depletion, and amortization expense(1)

26.8

19.8

EBITDA

71.9

57.0

Add:

Impact of acquisition-related expenses(2)

2.4

1.4

Impairment charge

1.3

—

Other, net (income) expense(3)

—

0.1

Adjusted EBITDA

$

75.6

$

58.5

Adjusted EBITDA Margin

15.5

%

14.2

%

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
March 31,

2020

2019

Net Income

$

31.6

$

27.7

Impact of acquisition-related expenses, net of tax(2)

1.8

1.1

Impairment charge

1.0

—

Adjusted Net Income

$

34.4

$

28.8

(1) Includes the impact of the fair value markup of acquired long-lived assets.
(2) Non-routine expenses associated with acquisitions, including the cost impact of the fair value markup of acquired inventory and other transaction costs.
(3) Included in Other, net expense was the impact of foreign currency exchange transactions of $0.0 million and $0.5 million for the three months ended March 31, 2020 and 2019, respectively.

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
March 31,

2020

2019

Construction Products

Revenues

$

149.4

$

106.0

Operating Profit

16.8

11.3

Add: Depreciation, depletion, and amortization expense

13.8

8.8

Segment EBITDA

30.6

20.1

Add: Impact of acquisition-related expenses(1)

1.5

1.4

Adjusted Segment EBITDA

$

32.1

$

21.5

Adjusted Segment EBITDA Margin

21.5

%

20.3

%

Energy Equipment

Revenues

$

223.2

$

209.1

Operating Profit

24.9

28.2

Add: Depreciation and amortization expense

7.4

7.0

Segment EBITDA

32.3

35.2

Add: Impairment charge

1.3

—

Adjusted Segment EBITDA

$

33.6

$

35.2

Adjusted Segment EBITDA Margin

15.1

%

16.8

%

Transportation Products

Revenues

$

117.0

$

97.5

Operating Profit

14.3

8.3

Add: Depreciation and amortization expense

4.4

3.8

Adjusted Segment EBITDA

$

18.7

$

12.1

Adjusted Segment EBITDA Margin

16.0

%

12.4

%

Operating Loss - Corporate

$

(10.9)

$

(10.5)

Impact of acquisition-related expenses - Corporate(1)

0.9

—

Add: Corporate depreciation expense

1.2

0.2

Adjusted EBITDA

$

75.6

$

58.5

(1) Non-routine expenses associated with acquisitions, including the cost impact of the fair value markup of acquired inventory and other transaction costs.

Arcosa, Inc.
Reconciliation of Adjusted Diluted EPS, Free Cash Flow, and Net Debt to Adjusted EBITDA
(unaudited)

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
March 31,

2020

2019

(in dollars per share)

Diluted EPS

$

0.65

$

0.56

Impact of acquisition-related expenses

0.04

0.02

Impairment charge

0.02

—

Adjusted Diluted EPS

$

0.71

$

0.58

GAAP does not define “Free Cash Flow” and it should not be considered as an alternative to cash flow measures defined by GAAP, including cash flow from operating activities. We use this metric to assess the liquidity of our consolidated business. We present this metric for the convenience of investors who use such metrics in their analysis and for shareholders who need to understand the metrics we use to assess performance and monitor our cash and liquidity positions. We define Free Cash Flow as cash provided by operating activities less capital expenditures.

Three Months Ended
March 31,

2020

2019

(in millions)

Cash Provided by Operating Activities

$

41.5

$

125.0

Capital expenditures

(21.1)

(18.0)

Free Cash Flow

$

20.4

$

107.0

GAAP does not define “Net Debt” and it should not be considered as an alternative to cash flow or liquidity measures defined by GAAP. The Company uses Net Debt, which it defines as total debt minus cash and cash equivalents to determine the extent to which the Company’s outstanding debt obligations would be satisfied by its cash and cash equivalents on hand. The Company also uses "Net Debt to Adjusted EBITDA", which it defines as Net Debt divided by Adjusted EBITDA for the trailing twelve months as a metric of its current leverage position. We present this metric for the convenience of investors who use such metrics in their analysis and for shareholders who need to understand the metrics we use to assess performance and monitor our cash and liquidity positions.

March 31, 2020

(in millions)

Total debt

$

356.9

Cash and cash equivalents

200.7

Net Debt

$

156.2

Adjusted EBITDA (trailing twelve months) (1)

$

285.6

Net Debt to Adjusted EBITDA

0.5

(1) Adjusted EBITDA includes 9 month pro-forma adjustment of $27.8 million for Cherry during Q2-Q4 of 2019, using previously disclosed annualized EBITDA of $37M.

Scott C. Beasley

Chief Financial Officer

Gail M. Peck

SVP, Finance & Treasurer

T 972.942.6500

[email protected]

David Gold

ADVISIRY Partners

T 212.661.2220

[email protected]

Source: Arcosa, Inc.

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