-
Expands Aggregates Business into Attractive Houston Region and Builds
Leadership Position in Growing Recycled Aggregates Market
-
Provides Platform for Additional Growth in Natural and Recycled
Aggregates
-
Accelerates Portfolio Shift into Higher-Valued Construction Products
Segment
Arcosa, Inc. (NYSE: ACA) (“Arcosa” or the “Company”), a provider of
infrastructure-related products and solutions, today announced that it
has closed the acquisition of Cherry Industries, Inc. and affiliated
entities (“Cherry” or “Cherry Companies”), a leading producer of natural
and recycled aggregates in the Houston, Texas market.
As previously announced, on December 12, 2019, Arcosa entered into a
definitive agreement to acquire Cherry for $298 million. With revenues
and EBITDA of approximately $176 million and $37 million, respectively,
for the trailing twelve-month period ended September 30, 2019, Cherry
adds 12 Houston locations to Arcosa’s existing 19 active aggregate and
specialty materials locations in Texas, building out Arcosa’s footprint
in a key Texas market with healthy population growth, major highway
investments, and positive private demand drivers.
At closing, the purchase price was funded with a combination of cash
on-hand and advances under a new $150 million five-year term loan
provided by a syndicate of banks. The interest rate under the facility,
initially set at 3.4%, is variable based on LIBOR and Arcosa’s leverage.
The acquisition is expected to be accretive to earnings in 2020. The
Company expects to provide guidance for full year 2020 when it releases
its fourth quarter and full year 2019 results in late February 2020.
Antonio Carrillo, President and Chief Executive Officer, commented, “We
are excited to announce the completion of the Cherry acquisition. Cherry
accelerates the growth of our Construction Products segment at an
attractive price, broadens our geographic presence into the Houston
market, and provides us a new complementary product line of recycled
aggregates.
“Arcosa’s Construction Materials portfolio now includes natural
aggregates, recycled aggregates, and specialty materials, each of which
offers a platform for continued organic and acquisition growth. We look
forward to working with the experienced Cherry team to grow in both
natural and recycled aggregates, and we feel well-positioned to benefit
from continued investment in infrastructure spending in Texas and
nationwide.”
About Arcosa
Arcosa, Inc., 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,” 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
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; improving
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,
2018, as may be revised and updated by Arcosa's Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K.
Reconciliation of EBITDA for Cherry
(in millions)
(unaudited)
“EBITDA” is defined as Cherry’s net income plus interest expense, income
taxes, and depreciation and amortization. EBITDA is not a calculation
based on generally accepted accounting principles. The amounts included
in the EBITDA calculation, however, are derived from amounts included in
the historical statements of operations data. In addition, EBITDA should
not be considered as an alternative to net income or operating income as
an indicator of Cherry’s operating performance, or as an alternative to
operating cash flows as a measure of liquidity. We believe EBITDA
assists investors in comparing a company’s performance on a consistent
basis without regard to depreciation and amortization and other
expenses, which can vary significantly depending upon many factors.
EBITDA for Cherry (For the Trailing Twelve Months Ended
September 30, 2019)
|
|
|
|
|
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Net income
|
|
|
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$
|
28.5
|
Add:
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|
|
|
|
Interest expense
|
|
|
|
|
0.1
|
Provision for income taxes
|
|
|
|
|
1.2
|
Depreciation and amortization expense
|
|
|
|
|
7.1
|
EBITDA
|
|
|
|
$
|
36.9
|
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