Arcosa(US:ACA)2021-11-03 16:00PART I Financial Statements This section presents the unaudited consolidated financial statements for the three and nine months ended September 30, 2021, showing increased revenue but decreased net income, significant balance sheet growth from acquisitions, and reduced operating cash flow Consolidated Statements of Operations For Q3 2021, revenues increased to $559.1 million from $490.0 million year-over-year, but operating profit declined to $37.5 million from $42.1 million, leading to a net income decrease to $23.7 million ($0.49 per diluted share) from $31.2 million ($0.64 per diluted share) Consolidated Statements of Operations | Financial Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $559.1M | $490.0M | $1,514.6M | $1,476.7M | | Total operating profit | $37.5M | $42.1M | $91.7M | $135.0M | | Net income | $23.7M | $31.2M | $60.4M | $96.1M | | Diluted EPS | $0.49 | $0.64 | $1.23 | $1.97 | Consolidated Balance Sheets As of September 30, 2021, total assets increased to $3.30 billion from $2.65 billion at year-end 2020, primarily driven by acquisitions which increased Goodwill and Property, Plant, and Equipment, with total debt also rising sharply to $743.8 million to fund these activities Consolidated Balance Sheets | Balance Sheet Item | September 30, 2021 (unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Total current assets | $810.9M | $664.9M | | Property, plant, and equipment, net | $1,273.0M | $913.3M | | Goodwill | $932.6M | $794.0M | | Total Assets | $3,301.2M | $2,646.7M | | Total current liabilities | $389.4M | $310.3M | | Debt | $743.8M | $248.2M | | Total Stockholders' equity | $1,940.9M | $1,892.2M | | Total Liabilities and Stockholders' Equity | $3,301.2M | $2,646.7M | Consolidated Statements of Cash Flows For the nine months ended September 30, 2021, net cash from operating activities significantly decreased to $76.8 million from $226.7 million, while investing activities used $569.3 million primarily for acquisitions, and financing activities provided $462.8 million largely from new debt issuance Consolidated Statements of Cash Flows | Cash Flow Activity (Nine Months Ended Sep 30) | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $76.8M | $226.7M | | Net cash required by investing activities | ($569.3M) | ($409.7M) | | Net cash provided by financing activities | $462.8M | $131.6M | | Net (decrease) in cash and cash equivalents | ($29.7M) | ($51.4M) | Note 2. Acquisitions and Divestitures In 2021, the company aggressively expanded its Construction Products segment through two major acquisitions, StonePoint for $374.8 million and Southwest Rock for $149.9 million, funded by cash, revolving credit, and new senior notes - Completed the acquisition of StonePoint, a top 25 U.S. construction aggregates company, for $374.8 million, funded by a new $400.0 million senior unsecured notes offering29 - Acquired Southwest Rock, a natural aggregates company in the Phoenix area, for $149.9 million, funded with cash and $100.0 million from the revolving credit facility29 Note 4. Segment Information For Q3 2021, revenue growth in Construction Products and Engineered Structures was offset by a significant decline in Transportation Products, leading to a sharp drop in operating profit for Transportation Products and impacting overall profitability Segment (Q3 2021 vs Q3 2020) | Segment | Revenues | Operating Profit | | :--- | :--- | :--- | | Construction Products | $227.4M vs $146.9M | $26.8M vs $20.8M | | Engineered Structures | $250.1M vs $222.6M | $23.6M vs $20.7M | | Transportation Products | $81.6M vs $120.7M | $1.5M vs $17.6M | Segment (Nine Months 2021 vs 2020) | Segment | Revenues | Operating Profit | | :--- | :--- | :--- | | Construction Products | $585.1M vs $444.5M | $60.5M vs $61.9M | | Engineered Structures | $699.6M vs $668.6M | $70.2M vs $66.5M | | Transportation Products | $230.0M vs $365.9M | $6.9M vs $47.8M | Note 7. Debt Total debt nearly tripled to $755.8 million as of September 30, 2021, from $254.5 million at year-end 2020, driven by the issuance of $400 million in senior notes and increased revolving credit facility borrowings to finance acquisitions Debt Component | Debt Component | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Revolving credit facility | $200.0M | $100.0M | | Term loan | $147.2M | $149.1M | | Senior notes | $400.0M | $0.0M | | Total debt | $755.8M | $254.5M | - On April 6, 2021, the Company issued $400.0 million of 4.375% senior notes that mature in April 2029 to fund the StonePoint acquisition2951 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's performance, highlighting strong demand in construction markets but significant weakness in transportation, with Q3 2021 revenues increasing 14.1% but operating profit falling 10.9% due to the Transportation Products segment Executive Overview The company highlights a 14.1% revenue increase for Q3 2021, driven by Construction Products and Engineered Structures, partially offset by a decline in Transportation Products, with operating profit decreasing due to lower volumes in the transportation segment - Revenues for Q3 2021 increased 14.1% to $559.1 million, while operating profit decreased by $4.6 million to $37.5 million compared to the same period in 202081 Backlog (Unsatisfied Performance Obligations) | Backlog | September 30, 2021 | September 30, 2020 | | :--- | :--- | :--- | | Utility, wind, and related structures | $465.9M | $429.3M | | Inland barges | $130.2M | $177.5M | Segment Discussion The segment discussion reveals mixed performance, with Construction Products seeing a 54.8% revenue increase and Engineered Structures growing 12.4%, while Transportation Products revenue fell 32.4% with operating profit plummeting 91.5% due to weak barge demand and high steel prices - Construction Products: Q3 revenues rose 54.8%, with acquisitions contributing approximately 40% of the increase, and operating profit grew 28.8%929394 - Engineered Structures: Q3 revenues increased 12.4% due to higher pricing and volumes in utility structures and storage tanks, and operating profit rose 14.0%9698 - Transportation Products: Q3 revenues decreased 32.4%, driven by a 41.2% drop in inland barge revenues, and operating profit fell 91.5% due to lower volumes and reduced efficiency102103 Liquidity and Capital Resources The company's liquidity position remains solid despite a decrease in operating cash flow to $76.8 million for the first nine months of 2021, with major financing activities including issuing $400 million in senior notes and borrowing an additional $100 million under the revolving credit facility to fund acquisitions - Net cash from operating activities for the nine months ended Sep 30, 2021, was $76.8 million, a significant decrease from $226.7 million in the prior year period110 - The company issued $400 million in senior notes and borrowed an additional $100 million under its revolving credit facility to fund acquisitions111 - As of September 30, 2021, the company had $271.8 million available under its revolving credit facility111 Quantitative and Qualitative Disclosures about Market Risk The company reports no material changes in its market risks since the end of the previous fiscal year, as detailed in its 2020 Annual Report on Form 10-K - There has been no material change in the company's market risks since December 31, 2020119 Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with the assessment of internal controls excluding recently acquired StonePoint and Southwest Rock businesses - The Chief Executive and Chief Financial Officers believe the company's disclosure controls and procedures are effective121 - The assessment of internal control over financial reporting excluded the StonePoint and Southwest Rock businesses, acquired in April and August 2021, respectively122 PART II OTHER INFORMATION Legal Proceedings This section refers to Note 15 of the Consolidated Financial Statements for detailed information regarding the company's ongoing legal proceedings - For details on legal proceedings, refer to Note 15 of the Consolidated Financial Statements124 Risk Factors The company states that there have been no material changes to its risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020 - There have been no material changes in the Company's risk factors from those set forth in the 2020 Annual Report on Form 10-K125 Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2021, Arcosa repurchased 98,456 shares of its common stock at an average price of $50.68 per share as part of its publicly announced repurchase program, with approximately $40.6 million remaining available for future repurchases Unregistered Sales of Equity Securities and Use of Proceeds | Period | Total Shares Purchased | Average Price Paid | Shares Purchased as Part of Program | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | :--- | | Q3 2021 Total | 99,304 | $50.69 | 98,456 | $40,625,892 | - The company's Board of Directors authorized a $50 million share repurchase program effective from January 1, 2021, through December 31, 2022127 Exhibits This section lists the exhibits filed with the Form 10-Q, including agreements related to recent acquisitions, certifications by the CEO and CFO, and XBRL data files