Arcosa, Inc. — 2021 Form 10-K Summary
Business context and reporting period
Arcosa provides infrastructure-related products across Construction Products, Engineered Structures, and Transportation Products. This annual report covers the fiscal year ended December 31, 2021; it does not provide a standalone fourth-quarter income statement. Comparisons below are principally with fiscal 2020.
Financial performance and position
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $2,036.4 million | $1,935.6 million |
| Operating profit | $107.3 million | $151.8 million |
| Operating margin | 5.3% | 7.8% |
| Net income | $69.6 million | $106.6 million |
| Diluted EPS | $1.42 | $2.18 |
| Cash from operations | $166.5 million | $259.9 million |
| Capital expenditures | $85.1 million | $82.1 million |
At year-end, cash was $72.9 million and current assets and liabilities were $767.9 million and $364.0 million, respectively. Total debt on the balance sheet was $679.5 million, including finance leases; cash less total debt was approximately $606.6 million. Revolver availability was $346.4 million, and the company reported compliance with financial covenants. The $400 million senior notes bear 4.375% interest and mature in 2029. The company paid $9.8 million in dividends and repurchased $9.4 million of shares during 2021.
Material changes versus 2020
- Revenue increased 5.2%, mainly from Construction Products acquisitions and growth, plus higher Engineered Structures pricing and utility-structure and storage-tank volumes.
- Operating profit fell 29.3% and net income fell 34.7%. Transportation Products operating profit declined from $54.6 million to $6.4 million as barge volumes and capacity utilization dropped. Corporate costs also rose.
- Construction Products revenue rose 34.2%, including the 2021 StonePoint and Southwest Rock acquisitions. Engineered Structures revenue rose 6.4%; Transportation Products revenue fell 34.5%.
- Operating cash flow declined by $93.4 million, including a $50.3 million net cash use from changes in current assets and liabilities, principally higher receivables and inventories. Investing cash outflow was $570.3 million, including $523.4 million net cash paid for acquisitions.
- Debt increased substantially, including issuance of $400 million of senior notes and acquisition-related borrowing. Goodwill rose to $934.9 million, mainly reflecting acquisitions.
Outlook, commentary, risks, and unusual items
- Management described construction demand as resilient and the Engineered Structures backlog as providing production visibility into 2022. Utility-structure order activity was strong; storage-tank inquiries were also strong. The company provided no consolidated numerical earnings or revenue guidance in the filing.
- Utility, wind, and related structures backlog was $437.5 million at year-end, up from $334.0 million; 90% was expected to be delivered in 2022. Inland barge backlog fell to $92.7 million from $175.5 million, with substantially all expected to be delivered in 2022.
- Near-term wind demand remained uncertain amid high steel prices and no production tax credit for new projects commencing in 2022 or later. Arcosa idled its Clinton, Illinois wind-tower facility in the fourth quarter.
- Barge orders were weak, pressured by high steel prices and reduced demand. The company reduced capacity at two active barge plants and idled its Madisonville, Louisiana facility. Management cited an aging barge fleet and replacement potential as longer-term support, while acknowledging subdued near-term demand.
- Inflation and steel-price volatility, supply-chain and labor constraints, weather, COVID-19, cyclicality, customer concentration, acquisition integration, and environmental and regulatory exposure are material risks. GE represented 9.5% of consolidated revenue, down from 15.3% in 2020.
- Notable items included an $8.7 million fourth-quarter legal settlement related to a pre-spin-off matter; $7.7 million of one-time wind-tower revenue from resolution of a customer dispute; a $3.9 million gain on sale of a non-operating facility; and $2.9 million of impairment charges on assets held for sale. A separate T&B litigation was settled in February 2022 without admission of liability or fault.
- COVID-related incremental costs were estimated at less than $1 million per quarter. The company stated that available cash, liquidity, and operating cash flow should fund foreseeable requirements.
Important facts for investors to verify
- Whether acquisitions deliver expected earnings and cash flow, and whether preliminary purchase-price allocations or acquired-asset valuations change materially.
- Whether Transportation Products utilization, barge orders, and segment profitability recover, and the effects of facility idling and capacity reductions.
- Whether Engineered Structures backlog converts to revenue and profit as expected, particularly given wind-credit uncertainty and steel costs.
- Cash conversion, working-capital needs, debt levels, covenant headroom, and variable-rate interest exposure; management estimated a one-percentage-point rate increase would add $1.7 million to 2022 interest expense after hedging.
- Environmental and litigation exposures, including the recorded $9.9 million total accrual for claims and contingencies and the company’s disclosed reasonably possible loss range of $9.1 million to $9.5 million.