Business context and reporting period
Concrete Pumping Holdings, Inc. provides concrete pumping and concrete waste-management services in the U.S. and U.K. This Form 10-K covers the fiscal year ended October 31, 2019, not a standalone fiscal fourth quarter. The December 6, 2018 business combination created a new accounting basis, so the company presents separate “Successor” and “Predecessor” periods. Year-over-year figures below use management’s non-GAAP combined presentation unless otherwise noted; they are not the audited GAAP presentation for a single reporting entity.
In May 2019, the company acquired Texas-based Capital Pumping for $129.2 million, funded with a common-stock offering and additional term debt. At year-end it operated 1,122 equipment units and approximately 135 locations.
Key financial results
| Metric | FY2019 combined | FY2018 | Change / context |
|---|---|---|---|
| Revenue | $283.0 million | $243.2 million | Up 16.3%; Capital was a major contributor. |
| Gross profit and margin | $125.4 million; 44.3% | $106.3 million; 43.7% | Margin up 60 basis points. |
| Operating income | $12.9 million | $40.0 million | Lower despite revenue growth, including higher amortization and transaction costs. |
| Net income (loss) | $(32.5) million | $28.4 million | FY2019 included higher interest and noncash charges, deal costs and debt-extinguishment costs. |
| Adjusted EBITDA, non-GAAP | $95.5 million | $79.2 million | Up 20.6%; excludes specified costs and other adjustments. |
| Cash from operating activities | Approximately $30.7 million combined | $39.6 million | FY2019 combines $22.8 million Successor and $7.9 million Predecessor cash flow. |
| Capital expenditures | Approximately $36.2 million combined | $31.7 million | FY2019 combines Successor and Predecessor periods. |
Balance sheet, debt and liquidity
- At October 31, 2019, cash and cash equivalents were $7.5 million; total assets were $871.4 million and total liabilities were $522.6 million.
- Debt outstanding was approximately $425.7 million: $402.1 million under the term loan and $23.6 million under the asset-based revolving facility. The balance sheet reports $381.8 million of total debt net of deferred financing costs, including the current portion.
- The company reported $29.2 million of available ABL borrowing capacity and total available liquidity of $36.7 million, including cash. It said existing cash, operating cash flow and facility availability should meet working-capital and capital-expenditure needs for the next 12 months. It was in compliance with debt covenants at year-end.
- Term debt bears floating-rate interest, generally LIBOR plus a 6.00% margin, and matures seven years after issuance; the ABL facility is capped at $60 million and matures five years after issuance. The company reported $36.5 million of net interest expense for FY2019 combined.
Material changes and management commentary
- U.S. Concrete Pumping revenue increased 24.0% to $203.7 million, including $25.2 million attributed to Capital and $7.3 million to the 2018 O’Brien acquisition. U.K. Operations revenue declined 2.5% to $49.2 million in reported dollars, but rose 2.4% excluding foreign-exchange effects. U.S. Waste Management revenue rose 6.8% to $30.4 million.
- Management attributed the gross-margin improvement to Capital, favorable fuel pricing and procurement savings, partly offset by higher depreciation following purchase accounting. General and administrative expense increased to $96.9 million from $58.8 million, including $25.1 million of additional amortization and higher public-company and stock-compensation costs.
- FY2019 results included $15.7 million in transaction costs and $16.4 million in debt-extinguishment costs. The prior year’s tax benefit included a $14.6 million benefit from the 2017 Tax Act remeasurement; no comparable benefit occurred in FY2019.
- Severe early-winter weather shut down nearly 40% of U.S. operations during the final week of the fourth fiscal quarter; management estimated approximately $1.5 million of delayed revenue.
- Management reported no goodwill impairment. However, its July 2019 test found reporting-unit fair values exceeded carrying values by only approximately 3%–4%. Goodwill was $276.1 million at year-end.
Outlook, risks and contingencies
The filing provides no specific revenue, earnings or EBITDA guidance. Management cited acquisition integration, expansion of Eco-Pan, and cross-selling as areas of focus. Its forward-looking statements are subject to risks and uncertainties, and the company disclaims an obligation to update them.
- Demand is tied to cyclical, seasonal construction activity and is vulnerable to adverse weather, economic slowdowns, competitive pricing and changes in infrastructure spending.
- High debt, variable interest rates, debt covenants and reliance on borrowing capacity may constrain investment or acquisition flexibility. The company also identified the potential transition away from LIBOR as a risk.
- Other material risks include fuel costs, foreign-exchange exposure to sterling, equipment replacement and residual values, skilled-labor availability, safety and insurance claims, environmental compliance, and acquisition integration.
- Some union multiemployer pension plans have been underfunded; the California plan was reported in the Yellow funding zone. The company said it did not intend to withdraw, but withdrawal liability could arise in certain circumstances.
- Management considered ordinary-course legal matters immaterial and recorded no contingent liability for them. It reported no known material environmental noncompliance.
- Management concluded disclosure controls and internal control over financial reporting were effective at October 31, 2019 and said previously reported material weaknesses had been remediated. Capital was excluded from the internal-control assessment; the independent auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- Reconcile the non-GAAP combined FY2019 figures with the separate Successor and Predecessor audited periods; the change in accounting basis limits direct comparability.
- Review the quality and sustainability of Adjusted EBITDA, including its adjustments, against operating cash flow, interest expense and required fleet investment.
- Confirm debt maturities, floating-rate exposure, ABL availability and covenant headroom, and assess refinancing capacity.
- Monitor the Capital acquisition’s integration and contribution, particularly given the company’s high goodwill balance and narrow reported impairment-test cushions.
- Assess how construction conditions, weather, sterling exchange rates, labor and insurance costs could affect future operating results and liquidity.