8-K
Arcosa, Inc. (ACA)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| Date of Report (Date of Earliest Event Reported): | October 12, 2020 |
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Arcosa, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)
| Delaware | 001-38494 | 82-5339416 | ||
|---|---|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
| 500 N. Akard Street, Suite 400 | ||||
| Dallas, | Texas | 75201 | ||
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (972) 942-6500
| Not Applicable |
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| (Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock ($0.01 par value) | ACA | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Item 2.02 Results of Operation and Financial Condition.
On October 12, 2020, the Company issued a press release announcing the closing of the acquisition of Strata Materials, LLC. A copy of this press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Also on October 12, 2020, the Company disseminated an investor presentation which is intended to be a supplement to the press release announcing the acquisition. A copy of the investor presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K.
The information in Item 2.02 of this report (including Exhibit 99.1 and 99.2) is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise be subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as otherwise expressly stated in such filing. Additionally, the submission of this Item 2.02 is not an admission of the materiality of any information in this Item 2.02
Item 7.01 Regulation FD Disclosure.
See “Item 2.02 – Results of Operation and Financial Condition” which is incorporated herein by reference.
The information in Item 7.01 of this report (including Exhibit 99.1 and 99.2) is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise be subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act or the Exchange Act, except as otherwise expressly stated in such filing. Additionally, the submission of this Item 7.01 is not an admission of the materiality of any information in this Item 7.01 that is required to be disclosed solely by Regulation FD.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description |
|---|---|
| 99.1 | Arcosa, Inc. Press Release dated October 12, 2020 |
| 99.2 | Arcosa, Inc. Investor Presentation dated October 2020 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Arcosa, Inc. | ||
|---|---|---|
| October 13, 2020 | By: | /s/ Scott C. Beasley |
| Name: Scott C. Beasley | ||
| Title: Chief Financial Officer |
Document
Exhibit 99.1
News Release
FOR IMMEDIATE RELEASE
Arcosa, Inc. Announces the Acquisition of Strata Materials
–$87 Million Acquisition Expands Recycled Aggregates Platform into Dallas-Ft. Worth Market
–Replicates January 2020 Acquisition of Cherry Companies with Complementary Recycled and Natural Aggregates
–Increases Exposure to Growing Product Category Driven By ESG and Economic Benefits
–Advances Arcosa’s Overall Portfolio Shift into Construction Products at an Attractive Valuation
DALLAS, Texas - ARCOSA, Inc. - October 12, 2020:
Arcosa, Inc. (NYSE: ACA) (“Arcosa” or the “Company”), a provider of infrastructure-related products and solutions, today announced that it has acquired Strata Materials (“Strata”) for approximately $87 million.
Strata is a leading provider of recycled aggregates in the Dallas-Ft. Worth area, with 5 recycled aggregates locations and 1 natural aggregates plant. Strata had trailing 12 month Adjusted EBITDA of approximately $10.2 million as of August 31, 2020, implying an ~8.5x EBITDA multiple. Strata produced more than 2 million tons of aggregates in the last 12 months.
Commenting on the transaction, Antonio Carrillo, Arcosa’s President and CEO, noted, “Building on the Cherry acquisition we completed in January 2020, we are excited to replicate this model in the Dallas-Ft. Worth region. Strata’s strategic network will allow us to serve customers with a complementary product offering that includes both recycled and natural aggregates. We believe that this model will have increasing value as the construction industry seeks to reduce transportation costs and its carbon footprint by using both recycled and natural aggregates.
“By leveraging our Cherry team’s operational and commercial expertise in recycled aggregates, and our long-standing relationships with DFW customers, we expect to drive incremental growth. Strata’s margins are similar to Cherry’s recycled aggregates margins, and should be accretive to our overall Construction Products Group margin.
“Overall, Strata is an excellent strategic fit as we continue to reposition our company around core infrastructure products. We are enthusiastic about welcoming the Strata team to Arcosa.”
The Company funded the approximately $87 million purchase price with cash on-hand and continues to have low leverage and ample liquidity to pursue its disciplined growth strategy. Pro-forma after the transaction, the Company had net debt/Adjusted EBITDA of ~0.6x as of June 30, 2020.
| 972.942.6500 | arcosa.com |
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Arcosa now operates a total of 40 natural aggregates, recycled aggregates, and specialty materials plants in Texas, a state with healthy population growth, strong fiscal health, and a robust public infrastructure program.
For supplemental information on the transaction, please refer to materials located on our website at https://ir.arcosa.com/news-events/press-releases. We plan to provide additional commentary on the acquisition during our third quarter earnings call on October 29, 2020.
Kirkland & Ellis LLP acted as legal advisor to Arcosa.
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 Strata, 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 June 30, 2020, and as may be revised and updated by Arcosa's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
| 972.942.6500 | 2 | arcosa.com |
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CONTACTS
| Scott C. Beasley | Gail M. Peck | David Gold |
|---|---|---|
| Chief Financial Officer | SVP, Finance & Treasurer | ADVISIRY Partners |
| T 972.942.6500 | T 212.661.2220 | |
| InvestorResources@arcosa.com | David.Gold@advisiry.com |
TABLES TO FOLLOW
| 972.942.6500 | 3 | arcosa.com |
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Reconciliation of Adjusted EBITDA and Net Debt to Adjusted EBITDA for Strata
(in millions)
(unaudited)
“Adjusted EBITDA” is defined as Strata’s pro-forma net income plus interest expense, income taxes, depreciation and amortization, and other adjustments, including compensation adjustments and non-recurring / non-operational expenses. GAAP does not define Adjusted EBITDA and it should not be considered as an alternative to earnings measures defined by GAAP, including net income. We use Adjusted EBITDA to assess the operating performance of our consolidated business, as a metric for incentive-based compensation, as a measure within our lending arrangements, and as a basis for strategic planning and forecasting as we believe that it closely correlates to long-term shareholder value. As a widely used metric by analysts, investors, and competitors in our industry, we believe Adjusted EBITDA also assists investors in comparing a company's performance on a consistent basis without regard to depreciation, depletion, amortization, and other items which can vary significantly depending on many factors.
| Strata Adjusted EBITDA | ||
|---|---|---|
| (For the Trailing Twelve Months ("TTM") Ended August 31, 2020) | ||
| Net income | $ | 5.9 |
| Add: | ||
| Interest expense | 0.4 | |
| Provision for income taxes | — | |
| Depreciation and amortization expense | 2.8 | |
| Pro-Forma adjustments, primarily for start-up plant | 1.1 | |
| Adjusted EBITDA | $ | 10.2 |
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.
| Net Debt to Adjusted EBITDA | June 30, 2020 | Proforma for Strata | ||
|---|---|---|---|---|
| Total debt | $ | 256.6 | $ | 256.6 |
| Cash and cash equivalents | 148.4 | 61.4 | ||
| Net Debt | 108.2 | 195.2 | ||
| Adjusted EBITDA, TTM^(1)^ | $ | 290.8 | $ | 301.0 |
| Net Debt to Adjusted EBITDA | 0.4 | 0.6 |
^(1)^ Adjusted EBITDA includes 6-month pro-forma adjustment of $18.5 million for Cherry during Q3-Q4 of 2019.
| 972.942.6500 | 4 | arcosa.com |
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a20201009_stratamaterial
Exhibit 99.2 Overview of Strata Materials Acquisition October 12, 2020
Forward-Looking Statements Some statements in this presentation, 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 Strata, 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 June 30, 2020, and as may be revised and updated by Arcosa's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Non-GAAP Financial Measures This presentation 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 provided in the Appendix. 2 / Moving Infrastructure Forward
Executive Summary . On October 12th, 2020, Arcosa announced that it acquired Strata Materials (“Strata”) for a purchase price of $87M . Strata is a leading provider of recycled aggregates in the Dallas-Ft. Worth area, with 5 recycled aggregates locations and 1 natural aggregates plant. Strata had trailing twelve month Adjusted EBITDA of $10.2M as of 08/31/2020, implying an ~8.5x EBITDA multiple . Strata is a strong strategic fit for Arcosa: - Replicates January 2020 acquisition of Cherry Companies by offering complementary recycled and natural aggregates - Expands our ability to serve DFW customers with broader product offering - Gains access to permitted locations in key growth areas of DFW market - Leverages Cherry’s operating and commercial expertise to drive incremental growth - Increases exposure to recycled aggregates, a growing product category driven by ESG and economic benefits - Advances Arcosa’s overall portfolio shift into Construction Products at an attractive valuation . We funded the transaction with cash on-hand and continue to have low leverage and ample liquidity to pursue our disciplined growth strategy. Pro-forma for the transaction, the Company had net debt/Adjusted EBITDA of ~0.6X as of June 30, 2020 . We plan to provide additional commentary on the acquisition during our Q3 2020 Earnings Call on October 29, 2020 3 / Moving Infrastructure Forward
Strata Materials Highlights Recycled Aggregates Natural Aggregates • ~80% of Revenue • ~20% of Revenue 6 • 5 locations across DFW • 1 location serving Southeast DFW DFW Locations 2M+ Tons Produced Annually . Strata provides a variety of material types derived from . Strata also mines sand & gravel used recycled concrete and recycled asphalt in concrete and asphalt mixtures $10.2M . Used in diverse applications, including road base, backfill, . Used in construction projects across ballast, erosion control, and the production of new hot-mix infrastructure, residential, and non- Adjusted EBITDA asphalt residential segments See Adjusted EBITDA reconciliation in Appendix. 4 / Moving Infrastructure Forward
Recycled Aggregates Overview Strata acquisition builds on Cherry’s leadership position in recycled aggregates, a growing product category due to ESG and economic benefits Demand drivers Description . Virgin natural aggregates are becoming more scarce near established metropolitan areas, as Resource scarcity decades of growth and development have depleted reserves . Permitting challenges are likely to push quarries further from dense, urban centers Reduced landfill . Landfills in major metropolitan areas are increasingly banning demolished concrete, or charging usage prohibitively to accept it Reduced GHG . Shortening length of freight hauls reduces GHG emissions and road congestion as well as emissions and lowers transportation costs road congestion Increased . As part of “Road to Recycling” initiative, TxDOT has prioritized using recycled aggregates where product possible: “Natural resources are conserved, waste disposal is reduced, and air quality is improved acceptance due to reduced haul distances and reduced energy consumption” (TxDOT website) . Particularly in Gulf Coast areas with adverse weather events, recycled aggregates are a cost- Major weather events competitive material to meet increased demand for erosion and flood control projects 5 / Moving Infrastructure Forward
Strata Materials Investment Highlights Expands ability to serve DFW customers with a Leverages Cherry’s Gains access to permitted complementary product operating and commercial locations in key growth offering that includes both expertise to drive areas of DFW market natural and recycled incremental growth aggregates Increases exposure to Advances Arcosa’s overall recycled aggregates, a portfolio shift into growing product category Construction Products at due to ESG and economic an attractive valuation benefits 6 / Moving Infrastructure Forward
Appendix
Non-GAAP Measures “Adjusted EBITDA” is defined as Strata’s pro-forma net income plus interest expense, income taxes, depreciation and amortization, and other adjustments, including compensation adjustments and non-recurring / non-operational expenses. GAAP does not define Adjusted EBITDA and it should not be considered as an alternative to earnings measures defined by GAAP, including net income. We use Adjusted EBITDA to assess the operating performance of our consolidated business, asametric for incentive-based compensation, as a measure within our lending arrangements, and as a basis for strategic planning and forecasting as we believe that it closely correlates to long-term shareholder value. As a widely used metric by analysts, investors, and competitors in our industry, we believe Adjusted EBITDA also assists investors in comparing a company's performance on a consistent basis without regard to depreciation, depletion, amortization, and other items which can vary significantly depending on many factors. 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. Strata Materials Adjusted EBITDA Net Debt to Adjusted EBITDA ($’s in millions) ($’s in millions) (unaudited) (unaudited) Twelve Months Ended June 30, Pro-Forma for August 31, 2020 2020 Strata Total debt $ 256.6 $ 256.6 Net income $ 5.9 Cash and cash equivalents 148.4 61.4 Add: Net Debt $ 108.2 $ 195.2 Interest expense, net 0.4 Provision for income taxes 0.0 Adjusted EBITDA (trailing twelve months) $ 290.8 $ 301.0 Depreciation, depletion, and amortization expense 2.8 Net Debt to Adjusted EBITDA 0.4 0.6 Pro-Forma adjustments, primarily for start-up plant 1.1 Adjusted EBITDA 10.2 Note: Adjusted EBITDA includes 6 month pro forma adjustment of $18.5 million for Cherry during Q3-Q4 of 2019 8 / Moving Infrastructure Forward