10-K 1 bbpp20191031_10k.htm FORM 10-K bbpp20191031_10k.htm
 

Table of Contents

 



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended October 31, 2019

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

 

Commission File Number: 001-38166

 

CONCRETE PUMPING HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

83-1779605

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)

 

500 E. 84th Ave., Suite A-5

Thornton, Colorado

80229

(Address of Principal Executive Offices)

(Zip Code)

 

(303) 289-7497
(Registrant’s Telephone Number, Including Area Code)

  

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, par value $0.0001 per share

BBCP

Nasdaq Stock Market LLC

 

Securities registered pursuant to Section 12(g) of the Act:

 

None

 


 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

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. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☒

 

The aggregate market value of the voting stock held by non-affiliates of the registrant was $80,206,804 based upon the market price of $6.60 per share on April 30, 2019. As of January 10, 2019, 58,259,482 shares of common stock, par value $0.0001 per share, were issued and outstanding.

 

Documents Incorporated by Reference: Portions of the registrant’s definitive proxy statement relating to the registrant’s 2020 Annual Meeting of Stockholders to be filed hereafter are incorporated by reference into Part III of this Annual Report on Form 10-K.

 



 

 

 

Concrete Pumping Holdings, Inc.

 

TABLE OF CONTENTS

 

 

 

Page

PART I

 

 

Item 1.

Business

1

Item 1A.

Risk Factors

5

Item 1B.

Unresolved Staff Comments

22

Item 2.

Properties

22

Item 3.

Legal Proceedings

22

Item 4.

Mine Safety Disclosures

22

 

 

 

PART II

 

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

23

Item 6.

Selected Financial Data

23

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

39

Item 8.

Financial Statements and Supplementary Data

40

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

84

Item 9A.

Controls and Procedures

84

Item 9B.

Other Information

85

 

 

 

PART III

 

 

Item 10.

Directors, Executive Officers and Corporate Governance

86

Item 11.

Executive Compensation

86

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

86

Item 13.

Certain Relationships and Related Transactions, and Director Independence

86

Item 14.

Principal Accounting Fees and Services

86

 

 

 

PART IV

 

 

Item 15.

Exhibits, Financial Statement Schedules

87

Item 16.

Form 10-K Summary

89

     
SIGNATURES   90

 

 

 

Cautionary Statement Concerning Forward-Looking Statements

 

Certain statements in this Annual Report on Form 10-K (this “Annual Report”) constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operation, cash flows, strategies and prospects. These forward-looking statements may be identified by terminology such as “likely,” “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this Annual Report are reasonable, we cannot guarantee future results. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Forms 10-K, 10-Q and 8-K should be considered.

                                                                                                                                                 

PART I

 

Item 1. Business

 

Concrete Pumping Holdings, Inc. is a Delaware corporation headquartered in Thornton, Colorado. We refer to Concrete Pumping Holdings, Inc. as the “Company,” “CPH,”, “us”, “we” or “our” in this Annual Report, and these designations include our subsidiaries unless we state otherwise. On December 6, 2018 (the “Closing Date”), the Company, formerly known as Concrete Pumping Holdings Acquisition Corp., consummated a business combination transaction (the “Business Combination”) pursuant to which it acquired (i) the private operating company formerly called Concrete Pumping Holdings, Inc. and (ii) the former special purpose acquisition company called Industrea Acquisition Corp (“Industrea”). In connection with the closing of the Business Combination, the Company changed its name to Concrete Pumping Holdings, Inc. 

 

Our principal executive offices are located at 500 E. 84th Ave., Suite A-5, Thornton, Colorado, 80229. We maintain a website at https://www.concretepumpingholdings.com/. The information contained on, or that may be accessed through, our website is not part of, and is not incorporated into, this Annual Report.

 

Overview

 

CPH is a leading provider of concrete pumping services and concrete waste management services in the United States (“U.S.”) and the United Kingdom (“U.K.”) based on size, primarily operating under what we believe are the only established, national brands in both geographies – Brundage-Bone Concrete Pumping, Inc. (“Brundage-Bone”) for concrete pumping in the U.S., Camfaud Group Limited (“Camfaud”) in the U.K., and Eco-Pan, Inc. (“Eco-Pan”) for waste management services in both the U.S. and U.K. The Brundage-Bone business was founded in 1983 in Denver, Colorado. Since then, Brundage-Bone has expanded across the U.S. through more than 45 acquisitions. Eco-Pan was founded in 1999 and was acquired by CPH in 2014. In November 2016, CPH entered the U.K. market through the acquisition of Camfaud. In May 2019, we acquired Capital Pumping LP and its affiliates (“Capital”), a concrete pumping provider based in Texas. The Capital acquisition provided us with complementary assets and operations and significantly expanded our footprint and business in Texas.

 

Concrete pumping is a highly specialized method of concrete placement that requires skilled operators to position a truck-mounted, fully-articulating boom for precise delivery of ready-mix concrete from mixer trucks to placing crews on a construction job site. In addition, proper concrete washout handling has become an increasing area of focus for our Company given rising awareness of environmental factors. We believe that our large fleet of specialized pumping equipment, washout pans and trucks, and highly-trained operators enable us to be the trusted provider of concrete placement and waste management solutions to our customers. We deliver and facilitate substantial labor cost savings, shortened concrete placement times, enhanced worksite safety, and efficient concrete washout containment, and thereby help improve the overall quality of construction projects. As of October 31, 2019, we operated a fleet of 1,122 units of equipment, with approximately 1,400 employees and approximately 135 locations globally.

 

 

With over 35 years of experience, we believe we are the only nationally-scaled provider of concrete pumping services in the U.S. and the U.K., with the most comprehensive fleet and highly-skilled operators to provide quality service. We are especially equipped to support large and technically complex construction projects, which generally command higher price points than smaller projects. In addition, we have actively focused our business on commercial and infrastructure construction projects, while continuing to pursue profitable residential opportunities. Our fleet is capable of handling multiple large projects concurrently, and can be deployed on a short-notice across the U.S. and the U.K., thereby allowing us to efficiently allocate resources depending on market conditions to more profitable markets. Our highly complementary Eco-Pan business provides customers with a one-stop solution for their concrete washout needs. We plan to continue establishing additional Eco-Pan locations across the U.S. and the U.K., and further deepen penetration of Eco-Pan services within our existing concrete pumping customer base through cross-selling. 

 

As of October 31, 2019, we estimate our share of the concrete pumping market to be approximately 13% in the U.S. and approximately 34% in the U.K., based on fleet size. In the U.S. and U.K. markets, we serve a large and diverse customer base and as of October 31, 2019, our top ten customers represented less than 10% of our total revenue and had an average tenure of more than 20 years.

 

Segments

 

We operate through the following three reportable segments:

 

U.S. Concrete Pumping: Our U.S. concrete pumping services segment represented 72% of our total revenue for the year ended October 31, 2019 and are primarily provided under our Brundage-Bone and Capital Pumping brands, which as of October 31, 2019 together operate a fleet of 757 equipment units from a diversified footprint of approximately 90 locations across 22 states. We provide operated concrete pumping services, for which customers are billed on a negotiated time and volume basis based on the duration of the job and yards of concrete pumped. Additional charges (such as a fuel surcharge and travel costs) are frequently added based on specific project requirements. Typically, we send a single operator with each concrete pump. We do not take ownership of the concrete and thus have minimal inventory or product liability risk. We typically do not engage in fixed-bid work or have surety bonding requirements and operate a daily fee-based revenue model regardless of overall construction project completion.

 

U.S. Concrete Waste Management Services: Our U.S. concrete waste management services segment represented 11% of our total revenue for the year ended October 31, 2019. Through our Eco-Pan business, we are a leading provider of concrete waste management services in the U.S. Eco-Pan provides a full-service, cost-effective, regulation-compliant solution to manage environmental issues caused by concrete washout. Eco-Pan is a route-based solution that operates 78 trucks and more than 6,300 custom metal pans for construction sites from 16 locations in the U.S. as of October 31, 2019. We charge a round-trip delivery fee and weekly or monthly rental rate for the pans, which provide a turnkey solution to the customer compared to the alternatives of bagging the waste concrete, pouring it into an on-site lined pit, or disposing of it into trash dumpsters and arranging for a pick-up. Eco-Pan delivers watertight pans to job sites to collect concrete washwater, and subsequently delivers it to recycling centers. Disposal fees charged by the recycling centers are passed on to the customer. To the extent that the pans are held at the job site for an extended number of days or irregular waste is found in the pan, we charge incremental fees. Our trucks are designed to allow for the pick-up and re-delivery of multiple pans, leading to significant incremental efficiencies as route densities increase.

 

U.K. Operations: Our U.K. operations represented 17% of our total revenue for the year ended October 31, 2019 and consisted of concrete pumping and concrete waste management services. Our concrete pumping services are primarily provided through either our Camfaud brand (operated pumping services) or our Premier Concrete Pumping brand (rental of pumping equipment on a long-term basis without an operator). Mobile equipment is charged to customers under a minimum hire rate, which is typically five to eight hours. Our concrete pumping business in the U.K. is comprised of a fleet of 365 equipment units that are serviced from 28 locations as of October 31, 2019. In addition, during the third fiscal quarter of 2019 we started concrete waste management operations under our Eco-Pan brand name in the U.K. and the results of these operations are included in this segment. Our Eco-Pan business in the U.K. is comprised of a fleet of 1 truck, approximately 60 custom metal pans, and is operated from 1 location as of October 31, 2019. In addition, we bill our customers for our Eco-Pan services in the same manner as our U.S. Eco-Pan services.

 

 

Competitive Environment 

 

The concrete pumping industry is highly fragmented in both the U.S. and the U.K. In the U.S., we believe there are approximately 1,000 industry participants, the majority of which operate with an average of five to ten pumps each, a limited number having a multi-regional presence (average of 50-60 pumps) and no other company having a national presence. We believe many industry participants are undercapitalized, utilize aged equipment and operate only smaller and significantly fewer boom pumps. In a typical geographic market, we compete with only one or two other concrete pumping companies that can perform the larger and more complex projects that we typically target. We estimate that approximately 65-75% of the concrete pumping jobs in the U.S. are served by small, local providers. Relative to the U.S., the U.K. has a higher proportion of regional players.

 

In the concrete waste management industry, we compete with local operators who may have a small number of washout pans but are not capable of offering services across the U.S. We believe we are the only operator of scale with a national footprint in this industry and estimate that there is only one competitor on a national level. While the technology underlying the washout pans is less sophisticated than that for a concrete pump, we believe having the route density that Eco-Pan has achieved is a differentiator in terms of profitability. Our U.K. business is the pioneer of the concrete waste management service in the U.K. and as such, we do not believe there is any equivalent competitor.

 

Equipment

 

Our fleet is operated by approximately 800 experienced employees as of October 31, 2019, each of whom is required to complete rigorous training and safety programs. In addition, we have 100 skilled mechanics who perform in-house equipment servicing. As of October 31, 2019, we owned 100% of our fleet consisting of 798 boom pumps, ranging in size from 17 to 65 meters, 65 placing booms, 18 telebelts, and 241 stationary pumps (1,122 pieces in total). As of October 31, 2019, the average age of our fleet was approximately 9 years old and most of our equipment had useful lives of 20 to 25 years.

 

Customers

 

We serve a base of more than 10,000 customers (often with several projects per customer) across the U.S. and the U.K. and have an approximate 95% customer retention rate based on our top 500 customers as of October 31, 2019. In addition, as of October 31, 2019, our top ten customers represented less than 10% of our total revenue and had an average tenure of more than 20 years. Our customer composition is largely dependent on geographic location and general economic and construction market trends within individual operating markets. We actively monitor regional trends and target customers in fast-growing markets through our extensive geographic footprint and knowledge of the local construction markets in each region in which we operate.

 

Our customer base consists of general contractors or concrete contractors that span across the commercial, infrastructure and residential end markets. We also sell replacement parts to regional operators that lack the capital and scale to independently maintain a sufficiently stocked replacement parts inventory. Our contractual arrangements with customers are typically on a project-to-project purchase order basis.

 

 

Suppliers

 

We primarily purchase pumping equipment, replacement parts, and fuel for our day-to-day operations. Concrete pumping equipment is primarily sourced from two suppliers – Schwing and Putzmeister. There are a number of other suppliers as well and we are not solely dependent upon any single one. We believe we are the concrete pumping industry’s largest consumer of concrete pumping supplies and, as such, have significant leverage with respect to making purchases. We typically purchase fuel in bulk at favorable prices and utilize onsite fuel storage facilities.

 

Employees

 

As of October 31, 2019, we had approximately 1,400 employees across the U.S. and the U.K., of which approximately 900 are highly-skilled equipment operators and mechanics, approximately 140 are managers, approximately 60 are in sales, and approximately 60 are dispatchers. The remaining employees include administrative support, corporate functions, and laborers. Our employees have an average tenure of over four years for pump operators. Additionally, our regional managers have, on average, approximately 30 years of experience in the concrete pumping industry. We maintain a “gold standard” training program, which ensures all operators can meet the requirements of any project. Operators are trained in concrete pumping as well as in basic mechanical repair, while shop managers are trained in inspection and maintenance of all critical truck systems.

 

Approximately 110 employees in CPH’s workforce are unionized across California, Oregon and Washington. These individuals are represented by the International Union of Operating Engineers (“IUOE”) under three separate collective bargaining agreements. We have historically maintained favorable relations with the IUOE and have not experienced any significant disputes, disagreements, strikes or work stoppages.

 

Safety

 

To our knowledge, we are the only concrete pumping company in the U.S. and the U.K. with a comprehensive, active safety program, an in-house safety department including dedicated safety directors at the corporate level, and a designated safety trainer at each branch. As part of our safety management program, we actively track key safety performance indicators at each branch location to monitor safety performance and take corrective action when needed. Over the last two years, our Total Recordable Incident Rate (“TRIR”) has remained significantly better than industry averages.

 

Legal Proceedings

 

The Company is currently involved in certain legal proceedings and other disputes with third parties that have arisen in the ordinary course of business. Management believes that the outcomes of these matters will not have a material impact on the Company’s financial statements and does not believe that any amounts need to be recorded for contingent liabilities in the Company’s consolidated balance sheet.

 

Environmental Matters

 

We are subject to various federal, state and local and environmental laws and regulations, including those governing the discharge of pollutants into air or water, the management, storage and disposal of, or exposure to, hazardous substances and wastes, the responsibility to investigate and clean up contamination, and occupational health and safety. Fines and penalties may be imposed for non-compliance with applicable environmental, health and safety requirements and the failure to have or to comply with the terms and conditions of required permits. We are not aware of any material instances of non-compliance with respect to environmental regulations.

 

Available Information

 

We make our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, available free of charge on our website as soon as reasonably practicable after we file or furnish the materials electronically with the Securities and Exchange Commission (“SEC”). To obtain any of this information, go to our investor relations website, www.ir.concretepumpingholdings.com, and select “SEC Filings”. Our investor relations website includes our Code of Business Conduct and Ethics and charters for the Audit, Compensation, Corporate Governance/Nominating Committees. These materials may also be obtained, free of charge, at www.ir.concretepumpingholdings.com (select “Governance”).

 

 

Item 1A. Risk Factors

 

Risks Related to the Company’s Business and Operations

 

Our business is cyclical in nature and a slowdown in the economic recovery or a decrease in general economic activity could have a material adverse effect on our revenues and operating results.

 

Substantially all of our customer base comes from the commercial, infrastructure and residential construction markets. A worsening of economic conditions or a decrease in available capital for investments could cause weakness in our end markets, cause declines in construction and industrial activity, and adversely affect our revenue and operating results.

 

The following factors, among others, may cause weakness in our end markets, either temporarily or long-term:

 

 

the depth and duration of an economic downturn and lack of availability of credit;

 

uncertainty regarding global, regional or sovereign economic conditions;

 

reductions in corporate spending for plants and facilities or government spending for infrastructure projects;

 

the cyclical nature of our customers’ businesses, particularly those operating in the commercial, infrastructure and residential construction sectors;

 

an increase in the cost of construction materials;

 

a decrease in investment in certain of our key geographic markets;

 

an increase in interest rates;

 

an overcapacity in the businesses that drive the need for construction;

 

adverse weather conditions, which may temporarily affect a particular region or regions;

 

reduced construction activity in our end markets;

 

terrorism or hostilities involving the U.S. or the U.K.;

 

change in structural construction designs of buildings (e.g., wood versus concrete);

 

negative impact on our U.K. business as a result of Brexit; and

 

oversupply of equipment or new entrants into the market resulting in pricing uncertainty.

 

A downturn in any of our end markets in one or more of our geographic markets caused by these or other factors could have a material adverse effect on our business, financial conditions, results of operations and cash flows.

 

Our business is seasonal and subject to adverse weather.

 

Since our business is primarily conducted outdoors, erratic weather patterns, seasonal changes and other weather-related conditions affect our business. Adverse weather conditions, including hurricanes and tropical storms, cold weather, snow, and heavy or sustained rainfall, reduce construction activity, restrict the demand for our products and services, and impede our ability to deliver and pump concrete efficiently or at all. In addition, severe drought conditions can restrict available water supplies and restrict production. Consequently, these events could adversely affect our business, financial condition, results of operations, liquidity and cash flows.

 

 

Our revenue and operating results have varied historically from period to period and any unexpected periods of decline could result in an overall decline in our available cash flows.

 

Our revenue and operating results have varied historically from period to period and may continue to do so. We have identified below certain of the factors that may cause our revenue and operating results to vary:

 

 

seasonal weather patterns in the construction industry on which we rely, with activity tending to be lowest in the winter and spring;

 

the timing of expenditure for maintaining existing equipment, new equipment and the disposal of used equipment;

 

changes in demand for our services or the prices we charge due to changes in economic conditions, competition or other factors;

 

changes in the interest rates applicable to our variable rate debt, and the overall level of our debt;

 

fluctuations in fuel costs;

 

general economic conditions in the markets where we operate;

 

the cyclical nature of our customers’ businesses;

 

price changes in response to competitive factors;

 

other cost fluctuations, such as costs for employee-related compensation and benefits;

 

labor shortages, work stoppages or other labor difficulties and labor issues in trades on which our business may be dependent in particular regions;

 

potential enactment of new legislation affecting our operations or labor relations;

 

timing of acquisitions and new branch openings and related costs;

 

possible unrecorded liabilities of acquired companies and difficulties associated with integrating acquired companies into our existing operations;

 

changes in the exchange rate between the U.S. dollar and Great Britain pound sterling;

 

potential increased demand from our customers to develop and provide new technological services in our business to meet changing customer preferences;

 

our ability to control costs and maintain quality;

 

our effectiveness in integrating new locations and acquisitions; and

 

possible write-offs or exceptional charges due to changes in applicable accounting standards, reorganizations or restructurings, obsolete or damaged equipment or the refinancing of our existing debt.

 

Our business is highly competitive and competition may increase, which could have a material adverse effect on our business.

 

The concrete pumping industry is highly competitive and fragmented. Many of the markets in which we operate are served by several competitors, ranging from larger regional companies to small, independent businesses with a limited fleet and geographic scope of operations. Some of our principal competitors may have more flexible capital structures or may have greater name recognition in one or more of our geographic markets. We generally compete on the basis of, among other things, quality and breadth of service, expertise, reliability, price and the size, quality and availability of our fleet of pumping equipment, which is significantly affected by the level of our capital expenditures. If we are required to reduce or delay capital expenditures for any reason, including due to restrictions contained in, or debt service payments required by, our credit facilities or otherwise, the ability to replace our fleet or the age of our fleet may put us at a disadvantage to our competitors and adversely impact our ability to generate revenue. In addition, our industry may be subject to competitive price decreases in the future, particularly during cyclical downturns in our end markets, which can adversely affect revenue, profitability and cash flow. We may encounter increased competition from existing competitors or new market entrants in the future, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

 

 

We are dependent on our relationships with key suppliers to obtain equipment for our business.

 

We depend on a small group of key manufacturers of concrete pumping equipment, and have historically relied primarily on three companies, the largest two of which experienced ownership changes in 2012. We cannot predict the impact on our suppliers of changes in the economic environment and other developments in their respective businesses, and we cannot provide any assurance that our vendors will provide their historically high level of service support and quality. Any deterioration in such service support or quality could result in additional maintenance costs, operational issues, or both. Insolvency, financial difficulties, strategic changes or other factors may result in our suppliers not being able to fulfill the terms of their agreements with us, whether satisfactorily or at all. Further, such factors may render suppliers unwilling to extend contracts that provide favorable terms to us or may force them to seek to renegotiate existing contracts with us. We believe the market for supplying equipment used in our business is increasingly competitive; however, termination of our relationship with any of our key suppliers, or interruption of our access to concrete pumping equipment, pipe or other supplies, could have a material adverse effect on our business, financial condition, results of operations and cash flows in the event that we are unable to obtain adequate and reliable equipment or supplies from other sources in a timely manner or at all.

 

If our average fleet age increases, our offerings may not be as attractive to potential customers and our operating costs may increase, impacting our results of operations.

 

As our equipment ages, the cost of maintaining such equipment, if not replaced within a certain period of time or amount of use, will likely increase. We estimate that our fleet assets generally will have a useful life of up to 25 years depending on the size of the machine, hours in service, yardage pumped, and, in certain instances, other circumstances unique to an asset. We manage our fleet of equipment according to the wear and tear that a specific type of equipment is expected to experience over its useful life. As of October 31, 2019, the average age of our equipment was approximately nine years, and it is our strategy to maintain average fleet age at approximately 10 years. If the average age of our equipment increases, whether as a result of our inability to access sufficient capital to maintain or replace equipment in a timely manner or otherwise, our investment in the maintenance, parts and repair for individual pieces of equipment may exceed the book value or replacement value of that equipment. We cannot assure you that costs of maintenance will not materially increase in the future. Any material increase in such costs could have a material adverse effect on our business, financial condition and results of operations. Additionally, as our equipment ages, it may become less attractive to potential customers, thus decreasing our ability to effectively compete for new business.

 

The costs of new equipment we use in our fleet may increase, requiring us to spend more for replacement equipment or preventing us from procuring equipment on a timely basis.

 

The cost of new equipment for use in our concrete pumping fleet could increase due to increased material costs to our suppliers or other factors beyond our control. Such increases could materially adversely impact our financial condition, results of operations and cash flows in future periods. Furthermore, changes in technology or customer demand could cause certain of our existing equipment to become obsolete and require us to purchase new equipment at increased costs.

 

We sell used equipment on a regular basis. Our fleet is subject to residual value risk upon disposition and may not sell at the prices or in the quantities we expect.

 

 

We continuously evaluate our fleet of equipment as we seek to optimize our vehicle size and capabilities for our end markets in multiple locations. We therefore seek to sell used equipment on a regular basis. The market value of any given piece of equipment could be less than its depreciated value at the time it is sold. The market value of used equipment depends on several factors, including:

 

 

the market price for comparable new equipment;

 

wear and tear on the equipment relative to its age and the effectiveness of preventive maintenance;

 

the time of year that it is sold;

 

the supply of similar used equipment on the market;

 

the existence and capacities of different sales outlets;

 

the age of the equipment, and the amount of usage of such equipment relative to its age, at the time it is sold;

 

worldwide and domestic demand for used equipment;

 

the effect of advances and changes in technology in new equipment models;

 

changing perception of residual value of used equipment by the Company’s suppliers; and

 

general economic conditions.

 

 

We include in income from operations the difference between the sales price and the net book value of an item of equipment sold. Changes in our assumptions regarding depreciation could change our depreciation expense, as well as the gain or loss realized upon disposal of equipment. Sales of our used concrete pumping equipment at prices that fall significantly below our expectations or in lesser quantities than we anticipate could have a negative impact on our financial condition, results of operations and cash flows.

 

We are exposed to liability claims on a continuing basis, which may exceed the level of our insurance or not be covered at all, and this could have a material adverse effect on our operating performance.

 

Our business exposes us to claims for personal injury, death or property damage resulting from the use of the equipment we operate, rent, sell, service or repair and from injuries caused in motor vehicle or other accidents in which our personnel are involved. Our business also exposes us to workers’ compensation claims and other employment-related claims. We carry comprehensive insurance, subject to deductibles, at levels we believe are sufficient to cover existing and future claims. Future claims may exceed the level of our insurance, and our insurance may not continue to be available on economically reasonable terms, or at all. Certain types of claims, such as claims for punitive damages, are not covered by our insurance. In addition, we are self-insured for the deductibles on our policies and have established reserves for incurred but not reported claims. If actual claims exceed our reserves, our financial condition, results of operations and cash flows would be adversely affected. Whether or not we are covered by insurance, certain claims may generate negative publicity, which may lead to lower revenues, as well as additional similar claims being filed.

 

Our business is subject to significant operating risks and hazards that could result in personal injury or damage or destruction to property, which could result in losses or liabilities to the Company.

 

Construction sites are potentially dangerous workplaces and often put our employees and others in close proximity with mechanized equipment and moving vehicles. Our equipment has been involved in workplace incidents and incidents involving mobile operators of our equipment in transit in the past and may be involved in such incidents in the future.

 

Our safety record is an important consideration for us and for our customers. If serious accidents or fatalities occur, regardless of whether we were at fault, or our safety record were to deteriorate, we may be ineligible to bid on certain work, be exposed to possible litigation, and existing service arrangements could be terminated, which could have a material adverse impact on our financial position, results of operations, cash flows and liquidity. Adverse experience with hazards and claims could have a negative effect on our reputation with our existing or potential new customers and our prospects for future work.

 

In the commercial concrete infrastructure market, our workers are subject to the usual hazards associated with providing construction and related services on construction sites, including environmental hazards, industrial accidents, hurricanes, adverse weather conditions and flooding. Operating hazards can cause personal injury or death, damage to or destruction of property, plant and equipment, environmental damage, performance delays, monetary losses or legal liability.

 

Potential acquisitions and expansions into new markets may result in significant transaction expense and expose us to risks associated with entering new markets and integrating new or acquired operations.

 

We may encounter risks associated with entering new markets in which we have limited or no experience. New operations require significant capital expenditures and may initially have a negative impact on our short-term cash flow, net income and results of operations. New start-up locations may not become profitable when projected or ever. In addition, our industry is highly fragmented, and we expect to consider acquisition opportunities from time to time when we believe they would enhance our business and financial performance.

 

 

Acquisitions may impose significant strains on our management, operating systems and financial resources, and could experience unanticipated integration issues. The pursuit and integration of acquisitions may require substantial attention from our senior management, which will limit the amount of time they have available to devote to our existing operations. Our ability to realize the expected benefits from any future acquisitions depends in large part on our ability to integrate and consolidate the new operations with our existing operations in a timely and effective manner. Future acquisitions also could result in the incurrence of substantial amounts of indebtedness and contingent liabilities (including environmental, employee benefits and safety and health liabilities), accumulation of goodwill that may become impaired, and an increase in amortization expenses related to intangible assets. Any significant diversion of management’s attention from our existing operations, the loss of key employees or customers of any acquired business, any major difficulties encountered in the opening of start-up locations or the integration of acquired operations or any associated increases in indebtedness, liabilities or expenses could have a material adverse effect on our business, financial condition or results of operations.

 

We may not realize the anticipated synergies and cost savings from acquisitions.

 

We have completed a number of acquisitions in recent years that we believe present revenue and cost-saving synergy opportunities. However, the integration of recent or future acquisitions may not result in the realization of the full benefits of the revenue and cost synergies that we expected at the time or currently expect within the anticipated time frame or at all. Moreover, we may incur substantial expenses or unforeseen liabilities in connection with the integration of acquired businesses. While we anticipate that certain expenses will be incurred, such expenses are difficult to estimate accurately and may exceed our estimates. Accordingly, the expected benefits may be offset by costs or delays incurred in integrating the businesses. Failure of recent or future acquisitions to meet our expectations and be integrated successfully could have a material adverse effect on our financial condition and results of operations.

 

We have operations throughout the United States and the United Kingdom, which subjects us to multiple federal, state, and local laws and regulations. Moreover, we operate at times as a government contractor or subcontractor which subjects us to additional laws, regulations, and contract provisions. Changes in law, regulations, government contract provisions, or other legal requirements, or our material failure to comply with any of them, can increase our costs and have other negative impacts on our business.

 

Each of our sites exposes us to a host of different local laws and regulations. These requirements address multiple aspects of our operations, such as worker safety, consumer rights, privacy, employee benefits, antitrust, emissions regulations and may also impact other areas of our business, such as pricing. In addition, government contracts and subcontracts are subject to a wide range of requirements not applicable in the purely commercial context, such as extensive auditing and disclosure requirements; anti-money laundering, antibribery and anti-gratuity rules; political campaign contribution and lobbying limitations; and small and/or disadvantaged business preferences. Even when a government contractor has reasonable policies and practices in place to address these risks and requirements, it is still possible for problems to arise. Moreover, government contracts or subcontracts are generally riskier than commercial contracts, because, when problems arise, the adverse consequences can be severe, including civil false claims (which can involve penalties and treble damages), suspension and debarment, and even criminal prosecution. Moreover, the requirements of laws, regulations, and government contract provisions are often different in different jurisdictions. Changes in these requirements, or any material failure by us to comply with them, can increase our costs, negatively affect our reputation, reduce our business, require significant management time and attention and generally otherwise impact our operations in adverse ways.

 

 

We are subject to numerous environmental and safety regulations. If we are required to incur compliance or remediation costs that are not currently anticipated, our liquidity and operating results could be materially and adversely affected.

 

Our facilities and operations are subject to comprehensive and frequently changing federal, state and local laws and regulations relating to environmental protection and health and safety. These laws and regulations govern, among other things, occupational safety, employee relations, the discharge of substances into the air, water and land, the handling, storage, transport, use and disposal of hazardous materials and wastes and the cleanup of properties affected by pollutants. We have in the past and may in the future fail to comply with applicable environmental and safety regulations. If we violate environmental or safety laws or regulations, we may be required to implement corrective actions and could be subject to civil or criminal fines or penalties or other sanctions. We cannot assure you that we will not have to make significant capital or operating expenditures in the future in order to comply with applicable laws and regulations or that we will comply with applicable environmental laws at all times. Such violations or liability could have a material adverse effect on our business, financial condition and results of operations.

 

Environmental laws also impose obligations and liability for the investigation and cleanup of properties affected by hazardous substance or fuel spills or releases. These liabilities are often joint and several and may be imposed on the parties generating or disposing of such substances or on the owner or operator of affected property, often without regard to whether the owner or operator knew of, or was responsible for, the presence of hazardous substances. We may also have liability for past contaminated properties historically owned or operated by companies that we have acquired or merged with, even though we never owned or operated such properties. Accordingly, we may become liable, either contractually or by operation of law, for investigation, remediation, monitoring and other costs even if the contaminated property is not presently owned or operated by us, or if the contamination was caused by third parties during or prior to our ownership or operation of the property. Contamination and exposure to hazardous substances can also result in claims for damages, including personal injury, property damage, and natural resources damage claims.

 

Most of our properties currently have above or below ground storage tanks for fuel and other petroleum products and oil-water separators (or equivalent wastewater collection/treatment systems). Given the nature of our operations (which involve the use of diesel and other petroleum products, solvents and other hazardous substances) for fueling and maintaining our equipment and vehicles, and the historical operations at some of our properties, we may incur material costs associated with soil or groundwater contamination. Future events, such as changes in existing laws or policies or their enforcement, or the discovery of currently unknown contamination, may give rise to remediation liabilities or other claims or costs that may be material.

 

 

Our business depends on favorable relations with our employees. Any deterioration of these relations, including those with our union-represented employees, issues with our collective bargaining agreements, labor shortages or increases in labor costs could disrupt our ability to serve our customers, lead to higher labor costs or the payment of withdrawal liability in connection with multiemployer plans, adversely affecting our business, financial condition and results of operations.

 

As of October 31, 2019, approximately 8% of our employees in the United States (but none of our employees in the United Kingdom) were represented by unions or covered by collective bargaining agreements. The states in which our employees are represented by unions or covered by collective bargaining agreements are California, Washington and Oregon. There can be no assurance that our non-unionized employees will not become members of a union or become covered by a collective bargaining agreement, including through an acquisition of a business whose employees are subject to such an agreement. Any significant deterioration in employee relations, shortages of labor or increases in labor costs at any of our locations could have a material adverse effect on our business, financial condition or results of operations. A slowdown or work stoppage that lasts for a significant period of time could cause lost revenues and increased costs and could adversely affect our ability to meet our customers’ needs.

 

Furthermore, our labor costs could increase as a result of the settlement of actual or threatened labor disputes. In addition, our collective bargaining agreement with our union in California is effective through June 30, 2020 and will continue on a year-to-year basis after unless parties provide advance written notice to change, amend, modify, or terminate the Agreement. No such notices have been given or received. Our collective bargaining agreement with our union in Oregon expires in 2020 and will need to be renegotiated. Our collective bargaining agreement with our union in Washington expires in 2037. We cannot assure you that renegotiation of these agreements will be successful or will not result in adverse economic terms or work stoppages or slowdowns.

 

Under our collective bargaining agreements, we are, and have previously been, obligated to contribute to several multiemployer pension plans on behalf of our unionized employees. A multiemployer pension plan is a defined benefit pension plan that provides pension benefits to the union-represented workers of various generally unrelated companies. Under the Employment Retirement Income Security Act of 1974 (“ERISA”), an employer that has an obligation to contribute to an underfunded multiemployer plan, as well as any other entities that are treated as a single employer with such employer under applicable tax and ERISA rules, may become jointly and severally liable, generally upon complete or partial withdrawal from a multiemployer plan, for its proportionate share of the plan’s unfunded benefit obligations. These liabilities are known as “withdrawal liabilities.” Certain of the multiemployer plans to which we are obligated to contribute have been in the past, and currently remain, significantly underfunded. Moreover, due to the level of underfunding, at least one of these multiemployer plans has been and continues to be in “endangered status,” meaning, among other things, that it is no longer in "critical" status and that the trustees of the plan are required to adopt a rehabilitation plan and we are required to pay a surcharge on top of our regular contributions to the plan.

 

We currently have no intention of withdrawing, in either a complete or partial withdrawal, from any of the multiemployer plans to which we currently contribute, and we have not been assessed any withdrawal liability in the past when we have ceased participating in certain multiemployer plans to which we previously contributed. In addition, we believe that the “construction industry” multiemployer plan exception may apply if we did withdraw from any of our current multiemployer plans. The “construction industry” exception generally delays the imposition of withdrawal liability in connection with an employer’s withdrawal from a “construction industry” multiemployer plan unless and until (among other things) that employer continues or resumes covered operations in the relevant geographic market without continuing or resuming (as applicable) contributions to the multiemployer plan. If this exception applies, withdrawal liability may be delayed or even inapplicable if we cease participation in any multiemployer plan(s). However, there can be no assurance that we will not withdraw from one or more multiemployer plans in the future, that the “construction industry exception” would apply if we did withdraw, or that we will not incur withdrawal liability if we do withdraw. Accordingly, we may be required to pay material amounts of withdrawal liability if one or more of those plans is underfunded at the time of withdrawal and withdrawal liability applies in connection with our withdrawal. In addition, we may incur material liabilities if any multiemployer plan(s) in which we participate requires us to increase our contribution levels to alleviate existing underfunding and/or becomes insolvent, terminates or liquidates.

 

 

Labor relations matters at construction sites where we provide services may result in increases in our operating costs, disruptions in our business and decreases in our earnings.

 

Labor relations matters at construction sites where we provide services may result in work stoppages, which would in turn affect our ability to provide services at such locations. If any such work stoppages were to occur at work sites where we provide services, we could experience a significant disruption of our operations, which could materially and adversely affect our business, financial condition, results of operations, liquidity, and cash flows. Also, labor relations matters affecting our suppliers could adversely impact our business from time to time.

 

If we determine that our goodwill has become impaired, we may incur impairment charges, which would negatively impact our operating results.

 

At October 31, 2019, we had recorded goodwill of $276.1 million related to multiple acquisitions. Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations.

 

We assess potential impairment of our goodwill at least annually. Impairment may result from significant changes in the manner of use of the acquired assets, negative industry or economic trends or significant underperformance relative to historical or projected operating results. An impairment of our goodwill may have a material adverse effect on our results of operations.

 

Turnover of members of our management, staff and pump operators and our ability to attract and retain key personnel may affect our ability to efficiently manage our business and execute our strategy.

 

Our business depends on the quality of, and our ability to attract and retain, our senior management and staff, and competition in our industry and the business world for top management talent is generally significant. Although we believe we generally have competitive pay packages, we can provide no assurance that our efforts to attract and retain senior management staff will be successful. In addition, the loss of services of certain members of our senior management could adversely affect our business until suitable replacements can be found.

 

We depend upon the quality of our staff personnel, including sales and customer service personnel who routinely interact with and fulfill the needs of our customers, and on our ability to attract and retain and motivate skilled operators and fleet maintenance personnel and other associated personnel to operate our equipment in order to provide our concrete pumping services to our customers. There is significant competition for qualified personnel in a number of our markets, including Texas, Colorado, Utah, and Idaho where we face competition from the oil and gas industry for qualified drivers and operators. There is a limited number of persons with the requisite skills to serve in these positions, and such positions require a significant investment by us in initial training of operators of our equipment. We cannot assure you that we will be able to locate, employ, or retain such qualified personnel on terms acceptable to us or at all. Our costs of operations and selling, general and administrative expenses have increased in certain markets and may increase in the future if we are required to increase wages and salaries to attract qualified personnel, and there is no assurance that we can increase our prices to offset any such cost increases. There is also no assurance that we can effectively limit staff turnover as competitors or other employers seek to hire our personnel. A significant increase in such turnover could negatively affect our business, financial condition, results of operations and cash flows.

 

 

Our credit facilities may limit our financial and operating flexibility.

 

Our credit facilities include negative covenants (including a springing fixed charge coverage ratio financial covenant under the ABL Credit Agreement (as defined below)) restricting our ability to incur additional indebtedness, pay dividends or make other payments, make loans and investments, sell assets, incur certain liens, enter into transactions with affiliates, and consolidate, merge or sell assets. These covenants limit the ability of the respective restricted entities to fund future working capital and capital expenditures, engage in future acquisitions or development activities, or otherwise realize the value of their assets and opportunities fully because of the need to dedicate a portion of cash flow from operations to payments on debt. In addition, such covenants limit the flexibility of the respective restricted entities in planning for, or reacting to, changes in the industries in which they operate.

 

We have a significant amount of indebtedness, which could adversely affect our cash flow and our ability to operate our business and to fulfill our obligations under our indebtedness.

 

We have a significant amount of indebtedness. As of October 31, 2019, we had $425.7 million of indebtedness outstanding in addition to $29.2 million of availability under our ABL Credit Agreement.

 

Our substantial level of indebtedness increases the possibility that we may not generate enough cash flow from operations to pay, when due, the principal of, interest on or other amounts due in respect of, these obligations. Other risks relating to our long-term indebtedness include:

 

 

increased vulnerability to general adverse economic and industry conditions;

 

higher interest expense if interest rates increase on our floating rate borrowings and our hedging strategies do not effectively mitigate the effects of these increases;

 

need to divert a significant portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of cash to fund working capital, capital expenditures, acquisitions, investments and other general corporate purposes;

 

limited ability to obtain additional financing, on terms we find acceptable, if needed, for working capital, capital expenditures, acquisitions and other investments, which may adversely affect our ability to implement our business strategy;

 

limited flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate or to take advantage of market opportunities; and

 

a competitive disadvantage compared to our competitors that have less debt.

 

In addition, it is possible that we may need to incur additional indebtedness in the future in the ordinary course of business. The terms of our Term Loan Agreement and the ABL Credit Agreement allow us to incur additional debt subject to certain limitations. If new debt is added to current debt levels, the risks described above could intensify. In addition, our inability to maintain certain leverage ratios could result in acceleration of a portion of our debt obligations and could cause us to be in default if we are unable to repay the accelerated obligations.

 

Changes in interest rates may adversely affect our earnings and/or cash flows.

 

Our indebtedness under our Term Loan Agreement and our ABL Credit Agreement bears interest at variable interest rates that use the London Inter-Bank Offered Rate (“LIBOR”) as a benchmark rate. On July 27, 2017, the United Kingdom’s Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit LIBOR quotations after 2021 (the “FCA Announcement”). The FCA announcement indicates that the continuation of LIBOR on the current basis cannot and will not be assured after 2021, and LIBOR may cease to exist or otherwise be unsuitable for use as a benchmark. Recent proposals for LIBOR reforms may result in the establishment of new methods of calculating LIBOR or the establishment of one or more alternative benchmark rates. Although our revolving credit facility provides for successor base rates, the successor base rates may be related to LIBOR, and the consequences of any potential cessation, modification or other reform of LIBOR cannot be predicted at this time. If LIBOR ceases to exist, we may need to amend our revolving credit facility and Term Loan, and we cannot predict what alternative interest rate(s) will be negotiated with our counterparties. As a result, our interest expense may increase, our ability to refinance some or all of our existing indebtedness may be effected and our available cash flow may be adversely affected.

 

 

Our business could be hurt if we are unable to obtain capital as required, resulting in a decrease in our revenue and cash flows.

 

We require capital for, among other purposes, purchasing equipment to replace existing equipment that has reached the end of its useful life and for growth resulting from expansion into new markets, completing acquisitions and refinancing existing debt. If the cash that we generate from our business, together with cash that we may borrow under our credit facilities, is not sufficient to fund our capital requirements, we will require additional debt or equity financing. If such additional financing is not available to fund our capital requirements, we could suffer a decrease in our revenue and cash flows that would have a material adverse effect on our business. Furthermore, our ability to incur additional debt is and will be contingent upon, among other things, the covenants contained in our credit facilities. In addition, our credit facilities place restrictions on our and our restricted subsidiaries’ ability to pay dividends and make other restricted payments (subject to certain exceptions). We cannot be certain that any additional financing that we require will be available or, if available, will be available on terms that are satisfactory to us. If we are unable to obtain sufficient additional capital in the future, our business could be materially adversely affected.

 

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under applicable debt instruments, which may not be successful.

 

Our ability to make scheduled payments on or to refinance our indebtedness obligations, including our credit facilities, depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

 

If our cash flows and capital resources are insufficient to fund debt service obligations, we may be forced to reduce or delay investments and capital expenditures, sell assets, seek additional capital or restructure or refinance indebtedness. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict business operations. The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest and principal on outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness.

 

If we are unable to collect on contracts with customers, our operating results would be adversely affected.

 

We have billing arrangements with a majority of our customers that provide for payment on agreed terms after our services are provided. If we are unable to manage credit risk issues adequately, or if a large number of customers should have financial difficulties at the same time, our credit losses could increase significantly above their low historical levels and our operating results would be adversely affected. Further, delinquencies and credit losses increased during the last recession and generally can be expected to increase during economic slowdowns or recessions.

 

If we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned, and our stock price may suffer.

 

Section 404 of the Sarbanes-Oxley Act requires any company subject to the reporting requirements of the U.S. securities laws to do a comprehensive evaluation of its and its consolidated subsidiaries’ internal control over financial reporting. To comply with this statute, we are currently required to document, test and report on our internal controls over financial reporting. In addition, starting in our 2022 fiscal year (and possibly earlier), our independent auditors will be required to issue an opinion on our audit of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of our testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act.

 

 

Disruptions in our information technology systems due to cyber security threats or other factors could limit our ability to effectively monitor and control our operations and adversely affect our operating results, and unauthorized access to customer information on our systems could adversely affect our relationships with our customers or result in liability.

 

Our information technology systems, including our enterprise resource planning system, facilitate our ability to monitor and control our assets and operations and adjust to changing market conditions and customer needs. Any disruptions in these systems or the failure of these systems to operate as expected could, depending on the magnitude of the problem, adversely affect our operating results by limiting our capacity to effectively monitor and control our assets and operations and adjust to changing market conditions in a timely manner. Many of our business records at most of our branches are still maintained manually, and loss of those records as a result of facility damage, personnel changes or otherwise could also cause such disruptions. In addition, because our systems sometimes contain information about individuals and businesses, our failure to appropriately safeguard the security of the data it holds, whether as a result of our own error or the malfeasance or errors of others, could harm our reputation or give rise to legal liabilities, leading to lower revenue, increased costs and other material adverse effects on our results of operations.

 

We have taken steps intended to mitigate these risks, including business continuity planning, disaster recovery planning and business impact analysis. However, a significant disruption or cyber intrusion could adversely affect our results of operations, financial condition and liquidity. Furthermore, instability in the financial markets as a result of terrorism, sustained or significant cyber-attacks, or war could also materially adversely affect our ability to raise capital.

 

Fluctuations in fuel costs or reduced supplies of fuel could harm our business.

 

Fuel costs represent a significant portion of our operating expenses and we are dependent upon fuel to transport and operate our equipment. We could be adversely affected by limitations on fuel supplies or increases in fuel prices that result in higher costs of transporting equipment to and from job sites and higher costs to operate our concrete pumps and other equipment. Although we are able to pass through the impact of fuel price charges to most of our customers, there is often a lag before such pass-through arrangements are reflected in our operating results and there may be a limit to how much of any fuel price increases we can pass onto our customers. Any such limits may adversely affect our results of operations.

 

We depend on access to our branch facilities to service our customers and maintain and store our equipment.

 

We depend on our primary branch facilities in the U.S. and U.K., respectively, to store, service and maintain our fleet. These facilities contain most of the specialized equipment we require to service our fleet, in addition to the extensive secure storage areas needed for a significant number of large vehicles. If any of our facilities were to sustain significant damage or become unavailable to us for any reason, including natural disasters, our operations could be disrupted, which could in turn adversely affect our relationships with our customers and our results of operations and cash flow. Any limitation on our access to facilities as a result of any breach of, or dispute under, our leases could also disrupt and adversely affect our operations.

 

 

We may be adversely affected by recent developments relating to the U.K.’s referendum vote in favor of leaving the European Union.

 

 

The U.K. held a referendum on June 23, 2016 in which a majority voted for the U.K.’s withdrawal from the European Union, which is commonly referred to as Brexit. As a result of this vote, a process of negotiation has begun to determine the terms of Brexit and of the U.K.’s relationship with the European Union going forward. The effects of the Brexit vote and the perceptions as to the impact of the withdrawal of the U.K. from the European Union may adversely affect business activity and economic and market conditions in the U.K., the Eurozone, and globally and could contribute to instability in global financial and foreign exchange markets, including volatility in the value of the pound sterling and the euro. In addition, Brexit could lead to additional political, legal and economic instability in the European Union. Currently, the date set for when the U.K. will withdraw from the European Union is January 31, 2020. Specifically, we have not identified any additional risk factors under Brexit than those discussed herein. Additionally, we have not identified any trends or potential changes to critical accounting estimates as a result of Brexit. We will continue to assess risk factors and accounting and reporting considerations Any of these effects of Brexit, and others we cannot anticipate, could adversely affect the value of our assets in the U.K., as well as our business, financial condition, results of operations and cash flows.

 

 

Due to the material portion of our business conducted in currency other than U.S. dollars, we have significant foreign currency risk.

 

Our consolidated financial statements are presented in accordance with GAAP, and we report, and will continue to report, our results in U.S. dollars. Some of our operations are conducted by subsidiaries in the United Kingdom. The results of operations and the financial position of these subsidiaries are recorded in the relevant foreign currencies and then translated into U.S. dollars. Any change in the value of the pound sterling against the U.S. dollar during a given financial reporting period would result in a foreign currency loss or gain on the translation of U.S. dollar denominated revenues and costs. The exchange rates between the pound sterling against the U.S. dollar have fluctuated significantly in recent years and may fluctuate significantly in the future. Consequently, our reported earnings could fluctuate materially as a result of foreign exchange translation gains or losses and may not be comparable from period to period.

 

We face market risks attributable to fluctuations in foreign currency exchange rates and foreign currency exposure on the translation into U.S. dollars of the financial results of our operations in the United Kingdom. Exchange rate fluctuations could have an adverse effect on our results of operations. Both favorable and unfavorable foreign currency impacts to our foreign currency-denominated operating expenses are mitigated to a certain extent by the natural, opposite impact on our foreign currency-denominated revenue. 

 

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.

 

We will be subject to income taxes in the United States, and our domestic tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

 

 

expected timing and amount of the release of any tax valuation allowances;

 

tax effects of stock-based compensation;

 

costs related to intercompany restructurings;

 

changes in tax laws, regulations or interpretations thereof; and

 

lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates 

 

In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal and state authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.

 

Risks Related to our Securities

 

There can be no assurance that we will be able to comply with Nasdaq’s continued listing standards.

 

If Nasdaq delists our securities from trading on its exchange for failure to meet the continued listing standards, we and our security holders could face significant material adverse consequences including:

 

 

a limited availability of market quotations for our securities;

 

a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock;

 

a decreased ability to issue additional securities or obtain additional financing in the future.

 

 

Shares of our common stock have been thinly traded in the past.

 

Although a trading market for our common stock exists, the trading volume has not been significant and there can be no assurance that an active trading market for our common stock will develop or, if developed, be sustained in the future. As a result of the thin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a large float, our common stock is less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stock may be more volatile. In the absence of an active public trading market, an investor may be unable to liquidate his or her investment in our common stock. Trading of a relatively small volume of our common stock may have a greater impact on the trading price for our stock than would be the case if our public float were larger. We cannot predict the prices at which our common stock will trade in the future.

 

In addition, the price of our securities can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if our securities become delisted from Nasdaq for any reason, and are quoted on the OTC Markets, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

 

Future sales of our common stock may cause the market price of our securities to drop significantly, even if our business is doing well.

 

Pursuant to that certain stockholders agreement, dated as of December 6, 2018 and amended on April 1, 2019 (the “Stockholders Agreement”), by and between the Company, CFLL Sponsor Holdings, LLC (formerly known as Industrea Alexandria LLC) (“CFLL Sponsor” or the “Sponsor”), Industrea’s former independent directors (collectively with the Sponsor and affiliates, the “Initial Stockholders”), Argand Partners Fund, LP (the “Argand Investor”) and certain holders of CPH’s capital stock prior to the Business Combination (the “CPH stockholders”):

 

 

Subject to certain exceptions, the CFLL Sponsor has agreed not to transfer 4,403,325 shares of our common stock (which were issued upon conversion of Industrea’s Class B common stock in connection with the Business Combination) (the “founder shares”) until the earlier of (A) March 6, 2020 or (B) earlier if (x) the last sale price of our common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing May 5, 2019 or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of our common stock for cash, securities or other property;

 

Each CPH Management Holder (as defined therein) has agreed not to transfer any shares of our common stock acquired by such CPH Management Holder in connection with the Business Combination for a period commencing on December 6, 2018 and ending on (a) December 6, 2019 with respect to one-third of such CPH Management Holder’s securities of the Company held as of the date of Closing; (b) December 6, 2020 with respect to one-third of such CPH Management Holder’s securities of the Company held as of the date of Closing; and (c) December 6, 2021 with respect to one-third of such CPH Management Holder’s securities of the Company held as of the date of Closing;

 

Subject to certain exceptions, until March 6, 2020, (i) CFLL Holdings, LLC (“CFLL Holdings”), an affiliate of the Argand Investor, may not transfer 7,784,313 shares of our common stock held by it and (ii) the CFLL Sponsor may not transfer 1,664,500 shares of our common stock held by it.

 

Notwithstanding the foregoing, if Peninsula Pacific or its affiliates no longer own in excess of 882,353 shares of our common stock, then the transfer restrictions on the shares of our common stock held the CFLL Sponsor and CFLL Holdings will be shortened to December 6, 2019. In addition, transfers of these securities are permitted in certain limited circumstances as set forth in the Stockholders Agreement, including with the prior written consent of our Board (with any director who has been designated to serve on our Board by or who is an affiliate of the requesting party abstaining from such vote) and to “affiliates,” as defined in the Stockholders Agreement.

 

 

In addition, the Initial Stockholders and certain of our other stockholders who received shares of our common stock in connection with the Closing are entitled to registration rights, subject to certain limitations, with respect to our common stock they received in the Business Combination pursuant to the Stockholders Agreement entered into in connection with the consummation of the Business Combination. Pursuant to the Stockholders Agreement, we filed a registration statement covering the founder shares, the private placement warrants (including any common stock issued or issuable upon exercise of any such private placement warrants) and the shares of our common stock issued at the Closing. In addition, these stockholders have certain demand and “piggyback” registration rights following the consummation of the Business Combination. We will bear certain expenses incurred in connection with the exercise of such rights.

 

Furthermore, we financed the acquisition of Capital through the sale of shares of common stock and an additional $60 million of borrowings under our Term Loan Agreement.

 

The presence of these additional securities trading in the public market as well as the shares of the Company’s common stock that may be issued pursuant to the Offer and Consent Solicitation, may have an adverse effect on the market price of the Company’s common stock.

 

Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.

 

Our quarterly operating results may fluctuate significantly because of several factors, including:

 

 

labor availability and costs for hourly and management personnel;

 

profitability of our products, especially in new markets and due to seasonal fluctuations;

 

changes in interest rates;

 

impairment of long-lived assets;

 

macroeconomic conditions, both nationally and locally;

 

negative publicity relating to products we serve;

 

changes in consumer preferences and competitive conditions;

 

expansion to new markets; and

 

fluctuations in commodity prices.

 

If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our industry, or if they change their recommendations regarding our common stock adversely, then the price and trading volume of our common stock could decline.

 

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our industry, or our competitors. Securities and industry analysts do not currently, and may never, publish research on us. If no securities or industry analysts commence coverage of the Company, our stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover the Company change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock would likely decline. If any analyst who may cover the Company were to cease coverage of the Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

 

Changes in laws or, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business, investments and results of operations.

 

We are subject to laws, regulations and rules enacted by national, regional and local governments and Nasdaq. In particular, we are required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations or rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations or rules, as interpreted and applied, could have a material adverse effect on our business and results of operations.

 

 

We may amend the terms of the warrants in a manner that may be adverse to holders with the approval by the holders of at least 65% of the then-outstanding warrants. As a result, the exercise price of our warrants could be increased, the exercise period could be shortened and the number of shares of common stock purchasable upon exercise of a warrant could be decreased without a warrant holder’s approval.

 

Our warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision but requires the approval by the holders of at least 65% of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the warrants in a manner adverse to a holder if holders of at least 65% of the then-outstanding public warrants approve of such amendment. Although our ability to amend the terms of the warrants with the consent of at least 65% of the then-outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares of common stock purchasable upon exercise of a warrant or automatically at our option.

 

Our warrants are exercisable for common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

 

As of October 31, 2019, there were 13,017,777 public warrants and no private placement warrants outstanding, respectively. The public warrants have an exercise price of $11.50 per share. To the extent such warrants are exercised, additional shares of common stock will be issued, which will result in dilution to the holders of common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our common stock.

 

We are a holding company with no business operations of our own and we depend on cash flow from our wholly owned subsidiaries to meet our obligations.

 

We are a holding company with no business operations of its own or material assets other than the stock of our subsidiaries, all of which are wholly-owned. All of our operations are conducted by our subsidiaries and as a holding company, we require dividends and other payments from our subsidiaries to meet cash requirements. The terms of any credit facility may restrict our subsidiaries from paying dividends and otherwise transferring cash or other assets to us. If there is an insolvency, liquidation or other reorganization of any of our subsidiaries, our stockholders likely will have no right to proceed against their assets. Creditors of those subsidiaries will be entitled to payment in full from the sale or other disposal of the assets of those subsidiaries before we, as an equity holder, would be entitled to receive any distribution from that sale or disposal. If our subsidiaries are unable to pay dividends or make other payments to us when needed, we will be unable to satisfy our obligations.

 

 

Anti-takeover provisions contained in the Charter and Bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

 

The Charter contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include:

 

 

a staggered board of directors providing for three classes of directors, which limits the ability of a stockholder or group to gain control of our Board;

 

no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

 

the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board;

 

a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

 

a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by members of our Board, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and

 

advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

 

The Charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

 

The Charter provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or our stockholders, (iii) any action asserting a claim against the Company, our directors, officers or employees arising pursuant to any provision of the DGCL, the Charter or the Bylaws, or (iv) any action asserting a claim against the Company, our directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim (A) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or (C) arising under the Securities Act or for which the Court of Chancery does not have subject matter jurisdiction including, without limitation, any claim arising under the Exchange Act, as to which the federal district court for the District of Delaware shall be the sole and exclusive forum.

 

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the provisions of the Charter described in the preceding paragraph. However, stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and such persons. Alternatively, a court may determine that the choice of forum provision is unenforceable. If a court were to find these provisions of the Charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

 

 

The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.

 

We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, which we refer to as the “JOBS Act.” As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. As a result, our stockholders may not have access to certain information they deem important. We had revenues during the fiscal year ended October 31, 2019 of approximately $258.6 million. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year (a) following August 1, 2022, the fifth anniversary of the Industrea IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

 

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

We cannot predict if investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result, there may be a less active trading market for securities and our stock price may be more volatile.

 

 

Item 1B. Unresolved Staff Comments.

 

None.

 

Item 2. Properties

 

Our corporate office is located at 500 E. 84th Avenue, Suite A-5, Thornton, CO 80229, where we lease approximately 13,415 square feet of office space in the building. We operate from a base of approximately 90 locations in 22 states in the U.S. and 29 locations in the U.K. as of October 31, 2019. We own 18 of our locations in the U.S. and lease the remaining locations and all of our locations in the U.K. are leased. Certain facilities are shared between Brundage-Bone and Eco-Pan and certain locations operate at construction sites without a formal lease. We believe that our properties are suitable for our current operating needs.

 

Item 3. Legal Proceedings

 

From time to time, we have been and may again become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any litigation that we believe to be material and we are not aware of any pending or threatened litigation against us that we believe could have a material adverse effect of our business, operating result, financial condition or cash flows.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Market Information

 

Our common stock is currently listed on Nasdaq under the symbol “BBCP” and our public warrants are quoted on the OTC Pink marketplace operated by OTC Markets Group, Inc. under the symbol “BBCPW.” As of October 31, 2019, there were 138 holders of record of shares of our common stock and 1 holder of record of our public warrants. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by the record holders of our common stock.

 

Dividend Policy

 

The Company has not paid any cash dividends on its common stock to date. It is the present intention of the Company to retain any earnings for use in its business operations and, accordingly, the Company does not anticipate the Board declaring any dividends in the foreseeable future.

 

Item 6. Selected Financial Data

 

We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act; therefore, pursuant to Item 301(c) of Regulation S-K, we are not required to provide the information required by this Item.

 

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and related notes included elsewhere in this Annual Report. In addition to historical information, the following discussion contains forward-looking statements, such as statements regarding the Company’s expectation for future performance, liquidity and capital resources that involve risks, uncertainties and assumptions that could cause actual results to differ materially from the Company's expectations. The Company's actual results may differ materially from those contained in or implied by any forward-looking statements. Factors that could cause such differences include those identified below and those described in “Cautionary Note Regarding Forward-Looking Statements,” and in Item 1A “Risk Factors” of this Annual Report on Form 10-K. The Company assumes no obligation to update any of these forward-looking statements.

 

Business Overview

 

The Company is a Delaware corporation headquartered in Thornton, Colorado. The audited consolidated financial statements included herein include the accounts of Concrete Pumping Holdings, Inc. and its wholly owned subsidiaries including Brundage-Bone Concrete Pumping, Inc. (“Brundage-Bone”), Capital Pumping (“Capital”), and Camfaud Group Limited (“Camfaud”), and Eco-Pan, Inc. (“Eco-Pan”).

 

On December 6, 2018, the Company, formerly known as Concrete Pumping Holdings Acquisition Corp., consummated a business combination transaction (the “Business Combination”) pursuant to which it acquired (i) the private operating company formerly called Concrete Pumping Holdings, Inc. (“CPH”) and (ii) the former special purpose acquisition company called Industrea Acquisition Corp (“Industrea”). In connection with the closing of the Business Combination, the Company changed its name to Concrete Pumping Holdings, Inc. The financial results described herein for the dates and periods prior to the Business Combination relate to the operations of CPH prior to the consummation of the Business Combination.

 

U.S. Concrete Pumping

 

In May 2019, the Company, through its wholly-owned subsidiary Brundage-Bone, acquired Capital Pumping, LP and its affiliates, a concrete pumping provider based in Texas for a purchase price of $129.2 million. The closing of this acquisition provided the Company with complementary assets and operations and significantly expanded its footprint and business in Texas.

 

Brundage-Bone and Capital are concrete pumping service providers in the United States ("U.S."). Their core business is the provision of concrete pumping services to general contractors and concrete finishing companies in the commercial, infrastructure and residential sectors. Equipment generally returns to a “home base” nightly and neither company contracts to purchase, mix, or deliver concrete. Brundage-Bone and Capital collectively have approximately 90 branch locations across 22 states with their corporate headquarters in Thornton (near Denver), Colorado.

 

In addition, in April 2018, Brundage-Bone completed the acquisition of substantially all of the assets of Richard O’Brien Companies, Inc., O’Brien Concrete Pumping-Arizona, Inc., O’Brien Concrete Pumping-Colorado, Inc. and O’Brien Concrete Pumping, LLC (collectively, “O’Brien” or the “O’Brien Companies”), solidifying Brundage-Bone’s presence in the Colorado and Phoenix, Arizona markets. All trucks of O'Brien were rebranded as Brundage-Bone trucks.

 

U.S. Concrete Waste Management Services
 

Eco-Pan provides industrial cleanup and containment services, primarily to customers in the construction industry. Eco-Pan uses containment pans specifically designed to hold waste products from concrete and other industrial cleanup operations. Eco-Pan has 16 operating locations across the United States with its corporate headquarters in Thornton, Colorado.

 

U.K. Operations

 

Camfaud is a concrete pumping service provider in the United Kingdom (“U.K.”). Their core business is primarily the provision of concrete pumping services to general contractors and concrete finishing companies in the commercial, infrastructure and residential sectors. Equipment generally returns to a “home base” nightly and does not contract to purchase, mix, or deliver concrete. Camfaud has 28 branch locations throughout the U.K., with its corporate headquarters in Epping (near London), England. In addition, during the third fiscal quarter of 2019, we started concrete waste management operations under our Eco-Pan brand name in the U.K. and currently operate from 1 location.

 

 

 

Results of Operations

 

To reflect the application of different bases of accounting as a result of the Business Combination, the tables provided below separate the Company’s results via a black line into two distinct periods as follows: (1) up to and including the Business Combination closing date (labeled “Predecessor”) and (2) the period after that date (labeled “Successor”). The periods after December 5, 2018 are the “Successor” periods while the periods before December 6, 2018 are the “Predecessor” periods.

 

The historical financial information of Industrea prior to the Business Combination (a special purpose acquisition company, or “SPAC”) has not been reflected in the Predecessor financial statements as these historical amounts have been determined to be not useful information to a user of the financial statements. SPACs deposit the proceeds from their initial public offerings into a segregated trust account until a business combination occurs, where such funds are then used to pay consideration for the acquiree and/or to pay stockholders who elect to redeem their shares of common stock in connection with the business combination. The operations of a SPAC, until the closing of a business combination, other than income from the trust account investments and transaction expenses, are nominal. Accordingly, no other activity in the Company was reported for periods prior to December 6, 2018 besides CPH’s operations as Predecessor.

 

As Industrea’s historical financial information is excluded from the Predecessor financial information, the business, and thus financial results, of the Successor and Predecessor entities, are expected to be largely consistent, excluding the impact on certain financial statement line items that were impacted by the Business Combination. Management believes reviewing our operating results for the twelve-months ended October 31, 2019 by combining the results of the Predecessor and Successor periods (“S/P Combined”) is more useful in discussing our overall operating performance when compared to the same period in the prior year. Accordingly, in addition to presenting our results of operations as reported in our consolidated financial statements in accordance with GAAP, the tables below present the non-GAAP combined results for the year.

 

 

                   

S/P Combined

         
   

Successor

   

Predecessor

   

(non-GAAP)

   

Predecessor

 

(dollars in thousands)

 

December 6, 2018 through October 31, 2019

   

November 1, 2018 through December 5, 2018

   

Year Ended October 31, 2019

   

Year Ended October 31, 2018

 
                                 

Revenue

  $ 258,565     $ 24,396     $ 282,961     $ 243,223  
                                 

Cost of operations

    143,512       14,027       157,539       136,876  

Gross profit

    115,053       10,369       125,422       106,347  

Gross margin

    44.5 %     42.5 %     44.3 %     43.7 %
                                 

General and administrative expenses

    91,914       4,936       96,850       58,789  

Transaction costs

    1,521       14,167       15,688       7,590  

Income (loss) from operations

    21,618       (8,734 )     12,884       39,968  
                                 

Other income (expense):

                               

Interest expense, net

    (34,880 )     (1,644 )     (36,524 )     (21,425 )

Loss on extinguishment of debt

    -       (16,395 )     (16,395 )     -  

Other income, net

    47       6       53       55  
      (34,833 )     (18,033 )     (52,866 )     (21,370 )
                                 

Income (loss) before income taxes

    (13,215 )     (26,767 )     (39,982 )     18,598  
                                 

Income tax expense (benefit)

    (3,303 )     (4,192 )     (7,495 )     (9,784 )
                                 

Net income (loss)

    (9,912 )     (22,575 )     (32,487 )     28,382  
                                 

Less preferred shares dividends

    (1,623 )     (126 )     (1,749 )     (1,428 )

Less undistributed earnings allocated to preferred shares

    -       -       -       (6,365 )

Income (loss) available to common shareholders

  $ (11,535 )   $ (22,701 )   $ (34,236 )   $ 20,589  

 

Twelve Months Ended October 31, 2019 and October 31, 2018
 

For the S/P Combined twelve months ended October 31, 2019, our net loss was $32.5 million, a decrease of $60.9 million compared to net income of $28.4 million in the same period a year ago, primarily as a result of higher depreciation expense, amortization expense, interest expense, transaction costs, and debt extinguishment costs, all of which were predominantly the result of the Business Combination. We had a 16.3% improvement in revenue year-over-year, driven mostly by the acquisition of Capital. Net income in the S/P Combined twelve months ended October 31, 2019 was negatively impacted by higher depreciation expense of $4.6 million, amortization expense of $25.1 million, interest expense, net of $15.1 million, transaction costs of $8.1 million, and debt extinguishment costs of $16.4 million, all of which were predominantly the result of the Business Combination. In addition to the impact from the Business Combination, we incurred an additional $4.1 million in general and administrative ("G&A") expenses on a year-over-year basis resulting from various costs related to being a newly public company, which included legal, accounting, and director-related costs. Approximately $1.6 million of such expenses are expected to be non-recurring. Furthermore, as a result of the enactment of the Tax Cuts and Jobs Act in December 2017 (the “2017 Tax Act”), we revalued our deferred tax assets and liabilities in the fiscal 2018 first quarter, resulting in the realization of a $14.6 million tax benefit whereas no such benefit was realized in fiscal 2019. These amounts were slightly offset by positive contributions to net income from the acquisition of Capital, which occurred in May 2019.

 

 

Total Assets

 

Total assets increased from $370.1 million as of October 31, 2018 to $871.4 million as of October 31, 2019. The primary driver of the increase in assets for all segments was the Business Combination, which resulted in a step-up in the value of certain assets, primarily goodwill and intangibles, coupled with the Capital acquisition in May 2019, which added $129.2 million in net assets to the balance sheet.

 

   

Successor

   

Predecessor

 
   

October 31,

   

October 31,

 

(in thousands)

 

2019

   

2018

 

Total Assets

               

U.S. Concrete Pumping

  $ 637,384     $ 277,936  

U.K. Operations

    138,435       39,167  

U.S. Concrete Waste Management Services

    137,646       32,782  

Corporate

    24,223       20,259  

Intersegment

    (66,323 )     -  
    $ 871,365     $ 370,144  

 

Revenue 

 

   

Successor

   

Predecessor

   

S/P Combined (non-GAAP)

   

Predecessor

   

Change

 

(in thousands)

 

December 6, 2018 through October 31, 2019

   

November 1, 2018 through December 5, 2018

    Year Ended October 31, 2019     Year Ended October 31, 2018     $    

%

 

Revenue

                                               

U.S. Concrete Pumping

  $ 187,031     $ 16,659     $ 203,690     $ 164,306     $ 39,384       24.0 %

U.K. Operations

    44,021       5,143       49,164       50,448       (1,284 )     -2.5 %

U.S. Concrete Waste Management Services

    27,779       2,628       30,407       28,469       1,938       6.8 %

Corporate

    2,258       242       2,500       -       2,500       0.0 %

Intersegment

    (2,524 )     (276 )     (2,800 )     -       (2,800 )     0.0 %
    $ 258,565     $ 24,396     $ 282,961     $ 243,223     $ 39,738       16.3 %

 

U.S. Concrete Pumping

 

For the S/P Combined twelve months ended October 31, 2019 for our U.S. Concrete Pumping segment, revenue was up 24.0%, or $39.4 million, year-over-year to $203.7 million. The incremental benefits from (1) the O’Brien acquisition in April 2018, which strengthened our presence in the Colorado and Arizona markets, and (2) the Capital acquisition in May 2019, which added additional pumping capacity in our Texas market, drove $7.3 million and $25.2 million of the increase in revenue, respectively. We also had notable improvements in revenue in our Oklahoma market, where we worked on several special projects utilizing placing booms, and in our Idaho market, where we experienced an increase in billable hours. These amounts were slightly offset by approximately $1.5 million of delayed revenue due to a severe, early winter storm that delivered snow and rain from Idaho to Texas that caused nearly 40% of our operations to be shut down for the final week of the fourth fiscal quarter of 2019.

 

 

U.K. Operations

 

For the S/P Combined twelve months ended October 31, 2019, revenue was down 2.5% year-over-year to $49.2 million. Excluding any impact from foreign exchange rates, revenue for this segment was up 2.4% year-over-year as a result of more favorable weather conditions in the U.K. for most of the fiscal year, which resulted in improved equipment utilization rates of our operating assets. This includes the revenue from the Eco-Pan business that began in the third fiscal quarter of 2019, which amounted to $0.1 million and was immaterial overall to the segment.

 

U.S. Concrete Waste Management Services

 

For the S/P Combined twelve months ended October 31, 2019, revenue was up $1.9 million or 6.8% year-over-year to $30.4 million. Improved volume in many of our markets was offset by slight declines in certain of our West Coast operations due to adverse weather conditions experienced during the first two quarters of fiscal 2019. Specifically, aggregate revenue from operations in the West Coast was down $0.8 million for the S/P combined twelve months ended October 31, 2019 as compared to the prior year period.

 

Corporate

 

There was limited movement in revenue for our Corporate segment for the periods presented. Any year-over-year changes for our Corporate segment was primarily related to the leasing of real estate to the different U.S Concrete Pumping facilities.

 

Gross Margin

 

Gross margin for the S/P Combined twelve months ended October 31, 2019 was 44.3%, up 60 basis points from the prior fiscal year. The increase in gross margin was primarily due to the post-acquisition contribution from the Capital acquisition, more favorable fuel pricing and improvement in the Company’s procurement costs. The gross margin improvement was partially offset by the step-up in depreciation related to the Business Combination, as depreciation expense related to pumping equipment is included in the Company’s cost of operations.

 

General and Administrative Expenses

 

G&A expenses for the S/P Combined twelve months ended October 31, 2019 were $96.9 million, up $38.1 million as compared to $58.8 million in the fiscal year ended October 31, 2018. As a percentage of revenue, G&A expenses were 34.2% as compared to 24.2% in the prior fiscal year. The increase was largely due to $25.1 million of higher amortization expense caused by the step-up in fair value of certain intangible assets mostly related to the Business Combination, a $4.1 million increase in legal, accounting, and director-related costs as a result of being a publicly traded company (approximately $1.6 million of these expenses are expected to be non-recurring) and a $3.3 million increase in stock-based compensation expense as a result of a stock grant made by the Company in April of 2019. The remaining increase is largely attributable to incremental G&A expenses from both the O'Brien and Capital acquisitions.

 

Transaction Costs & Debt Extinguishment Costs

 

Transaction costs include expenses for legal, accounting, and other professionals that were engaged in connection with an acquisition. Transaction costs and debt extinguishment costs for the S/P Combined twelve months ended October 31, 2019 were $15.7 million and $16.4 million, respectively. Of those amounts, the Predecessor incurred $14.2 million of the S&P Combined transaction costs and all of the S&P Combined debt extinguishment costs, all of which were related to the Business Combination. The remaining transaction costs incurred during the Successor period were predominantly related to the acquisition of Capital in May 2019. Transaction costs incurred during the fiscal year ended October 31, 2018 were primarily related to the O’Brien acquisition.

 

 

Interest Expense, Net

 

Interest expense, net for the S/P Combined twelve-months ended October 31, 2019 was $36.5 million up $15.1 million from fiscal 2018. As part of the Business Combination, the Company extinguished all previous outstanding debt and entered into a new Term Loan Agreement (as defined below) and ABL Credit Agreement (as defined below). In addition, in order to finance the acquisition of Capital, the Company added $60.0 million of incremental term loans under the Term Loan Agreement in May 2019. The increased interest expense, net, was the result of higher average debt amounts outstanding during the twelve months ended October 31, 2019 when compared to fiscal year ended October 31, 2018, coupled with interest rates on both new financial instruments being higher than the previous debt instruments.

 

Income Tax (Benefit) Provision

 

For the S/P Combined twelve months ended October 31, 2019, the Company recorded an income tax benefit of $7.5 million on a pretax loss of $40.0 million, resulting in an effective tax rate of 18.7%. Our income tax benefit was negatively impacted mostly by $1.4 million of transaction expenses that were not deductible and $0.3 million in deferred taxes on undistributed foreign earnings.

 

For the fiscal year ended October 31, 2018, we had an income tax benefit of $9.8 million on pretax income of $18.6 million. In December 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35 percent to 21 percent effective January 1, 2018. In accordance with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of ASC Topic 740, the Company recognized the income tax effects of the 2017 Tax Act in its consolidated financial statements in the period the 2017 Tax Act was signed into law. As such, the Company’s consolidated financial statements for the period ended October 31, 2018 reflect the income tax effects of the 2017 Tax Act for which the accounting is complete and provisional amounts for those specific income tax effects for which the accounting is incomplete but a reasonable estimate could be determined. All provisional amounts have been finalized for the October 31, 2019 financial statements as required by Staff Accounting Bulletin No. 118. Such finalization had no impact on the tax provision for 2018.

 

 

Adjusted EBITDA1

 

                   

S/P Combined

                         
   

Successor

   

Predecessor

   

(non-GAAP)

   

Predecessor

   

Change

 

(in thousands, except percentages)

 

December 6, 2018 through October 31, 2019

   

November 1, 2018 through December 5, 2018

    Year Ended October 31, 2019     Year Ended October 31, 2018     $    

%

 

U.S. Concrete Pumping

  $ 56,069     $ 6,752     $ 62,821     $ 46,793     $ 16,028       34.3 %

U.K. Operations

    14,034       1,660       15,694       16,752       (1,058 )     -6.3 %

U.S. Concrete Waste Management Services

    13,178       999       14,177       13,238       939       7.1 %

Corporate

    2,625       177       2,802       2,367       435       18.4 %
    $ 85,906     $ 9,588     $ 95,494     $ 79,150     $ 16,344       20.6 %

1Please see “Non-GAAP Measures (EBITDA and Adjusted EBITDA)” below 

 

U.S. Concrete Pumping 

 

Adjusted EBITDA for our U.S. Concrete Pumping segment was $62.8 million for the S/P Combined twelve months ended October 31, 2019 as compared to $46.8 million for the fiscal year ended October 31, 2018. The 34.3% year-over-year increase was primarily attributable to the Capital acquisition, improved gross margins, and volume growth across the majority of the U.S. markets.

 

U.K. Operations

 

Adjusted EBITDA for our U.K. Operations segment was $15.7 million for the S/P Combined twelve months ended October 31, 2019 as compared to $16.8 million for the fiscal year ended October 31, 2018. The 6.3% decline was primarily attributable to the reduced revenue previously discussed.

 

U.S. Concrete Waste Management Services

 

Adjusted EBITDA for our U.S. Concrete Waste Management Services segment was $14.2 million for the S/P Combined twelve months ended October 31, 2019 as compared to $13.2 million for the fiscal year ended October 31, 2018. The 7.1% year-over-year increase was due primarily to the year-over-year change in revenue discussed previously.

 

Corporate

 

There was limited movement in Adjusted EBITDA for our Corporate segment for the periods presented. Any year-over-year changes for our Corporate segment was primarily related to the allocation of overhead costs.

 

 

Liquidity and Capital Resources

 

Overview

 

We use our liquidity and capital resources to: (1) finance working capital requirements; (2) service our indebtedness; (3) purchase property, plant and equipment; and (4) finance strategic acquisitions, such as the acquisition of Capital. Our primary sources of liquidity are cash generated from operations, available cash and cash equivalents and access to our revolving credit facility under our Asset-Based Lending Credit Agreement (the “ABL Credit Agreement”), which provides for aggregate borrowings of up to $60.0 million, subject to a borrowing base limitation. As of October 31, 2019, we had $7.5 million of cash and cash equivalents and $29.2 million of available borrowing capacity under the ABL Credit Agreement, providing total available liquidity of $36.7 million.

 

Capital Resources

 

Our capital structure is primarily a combination of (1) permanent financing, represented by stockholders’ equity; (2) zero-dividend convertible perpetual preferred stock; (3) long-term financing represented by our Term Loan Agreement (defined below) and (4) short-term financing under our ABL Credit Agreement. We may from time to time seek to retire or pay down borrowings on the outstanding balance of our ABL Credit Agreement or Term Loan Agreement using cash on hand. Such repayments, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

 

We believe our existing cash and cash equivalent balances, cash flow from operations and borrowing capacity under our ABL Credit Agreement will be sufficient to meet our working capital and capital expenditure needs for the next 12 months. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, potential acquisitions and overall economic conditions. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity could result in dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations.

 

 

Term Loan Agreement and ABL Credit Agreement

 

As part of the Business Combination, the Company entered into (i) a Term Loan Agreement, dated December 6, 2018, among the Company, certain subsidiaries of the Company, Credit Suisse AG, Cayman Islands Branch as administrative agent and Credit Suisse Loan Funding LLC, Jefferies Finance LLC and Stifel Nicolaus & Company Incorporated LLC as joint lead arrangers and joint bookrunners, and the other Lenders party thereto (as amended, the “Term Loan Agreement”) and (ii) a Credit Agreement, dated December 6, 2018, among the Company, certain subsidiaries of the Company, Wells Fargo Bank, National Association, as agent, sole lead arranger and sole bookrunner, the other Lenders party thereto and the other parties thereto (“ABL Credit Agreement”). Summarized terms of those debt agreements are included below.

 

Term Loan Agreement

 

Summarized terms of the Term Loan Agreement are as follows:

 

 

Provides for an original aggregate principal amount of $357.0 million. This amount was increased in May 2019 by $60.0 million in connection with the acquisition of Capital;

 

The initial term loans advanced will mature and be due and payable in full seven years after the issuance, with principal amortization payments in an annual amount equal to 5.00% of the original principal amount;

 

Borrowings under the Term Loan Agreement, will bear interest at either (1) an adjusted LIBOR rate or (2) an alternate base rate, plus an applicable margin of 6.00% or 5.00%, respectively;

 

The Term Loan Agreement is secured by (i) a first priority perfected lien on substantially all of the assets of the Company and certain of its subsidiaries that are loan parties thereunder to the extent not constituting ABL Credit Agreement priority collateral and (ii) a second priority perfected lien on substantially all ABL Credit Agreement priority collateral, in each case subject to customary exceptions and limitations;

 

The Term Loan Agreement includes certain non-financial covenants.   

 

The outstanding balance under the Term Loan Agreement as of October 31, 2019 was $402.1 million and the Company was in compliance with all debt covenants. The Company’s interest on borrowings under the Term Loan Agreement bear interest using the London Inter-bank Offered Rate (LIBOR) as the base rate plus an applicable margin in line with the summarized terms of the Term Loan Agreement as described above.

 

 

Asset Based Revolving Lending Credit Agreement

 

Summarized terms of the ABL Credit Agreement are as follows:

 

 

Borrowing availability in U.S. Dollars and GBP up to a maximum of $60.0 million;

 

Borrowing capacity available for standby letters of credit of up to $7.5 million and for swingline loan borrowings of up to $7.5 million. Any issuance of letters of credit or making of a swingline loan will reduce the amount available under the ABL Facility;

 

All loans advanced will mature and be due and payable in full five years after the issuance;

 

Amounts borrowed may be repaid at any time, subject to the terms and conditions of the agreement;

 

Interest on borrowings in U.S. Dollars and GBP under the ABL Credit Agreement, will bear interest at either (1) an adjusted LIBOR rate or (2) a base rate, in each case plus an applicable margin currently set at 2.25% and 1.25%, respectively. The ABL Credit Agreement is subject to two step-downs of 0.25% and 0.50% based on excess availability levels;

 

U.S. ABL Credit Agreement obligations are secured by (i) a perfected first priority security interest in substantially all personal property of the Company and certain of its subsidiaries that are loan parties thereunder consisting of all accounts receivable, inventory, cash, intercompany notes, books and records, chattel paper, deposit, securities and operating accounts and all other working capital assets and all documents, instruments and general intangibles related to the foregoing (the “U.S. ABL Priority Collateral”) and (ii) a perfected second priority security interest in substantially all Term Loan Agreement priority collateral, in each case subject to customary exceptions and limitations;

 

U.K. ABL Credit Agreement obligations are secured by (i) a perfected first-priority security interest in (A) the U.S. ABL Priority Collateral, (B) all of the stock (or other ownership interests) in, and held by, the U.K. borrower subsidiaries of the Company, and (C) all of the current and future assets and property of the U.K. subsidiaries of the Company that are loan parties thereunder, including a first-ranking floating charge over all current and future assets and property of each U.K. subsidiary of the Company that is a loan party thereunder; and (ii) a perfected, second-priority security interest in substantially all Term Loan Agreement priority collateral, in each case subject to customary exceptions and limitations; and

 

The ABL Credit Agreement also includes (i) a springing financial covenant (fixed charge coverage ratio) based on excess availability levels that the Company must comply with on a quarterly basis during required compliance periods and (ii) certain non-financial covenants.

 

The outstanding balance under the ABL Credit Agreement as of October 31, 2019 was $23.6 million and the Company was in compliance with all debt covenants thereunder.

 

Cash Flows

 

Cash generated from operating activities typically reflects net income, as adjusted for non-cash expense items such as depreciation, amortization and stock-based compensation, and changes in our operating assets and liabilities. Generally, we believe our business requires a relatively low level of working capital investment due to low inventory requirements and customers paying the Company as invoices are submitted daily for many of our services.

 

Successor

 

Net cash provided by (used in) operating activities generally reflects the cash effects of transactions and other events used in the determination of net income or loss. Net cash provided by operating activities during the period from December 6, 2018 through October 31, 2019 (the “Successor Period”) was $22.8 million. The Company had a net loss of $9.9 million that included significant non-cash charges totaling $60.0 million as follows: (1) depreciation of $20.3 million, (2) amortization of intangible assets of $32.4 million, (3) amortization of deferred financing costs of $3.7 million and (4) stock-based compensation expense of $3.6 million. These amounts were partially offset by net cash outflows related to the following activity: (1) an increase of $5.9 million in trade receivables, (2) a $0.5 million increase in inventory, (3) a $1.0 million increase in prepaid expenses and other current assets, (4) an increase of $2.4 million in our net deferred income taxes, (5) a decrease in income taxes payable of $1.4 million, (6) a $7.3 million decrease in accounts payable, and (7) a decrease of $8.3 million in accrued payroll, accrued expenses and other current liabilities.

 

 

We used $374.9 million to fund investing activities during the Successor Period. The Company paid $449.2 million to fund the Business Combination, $129.2 million to fund the acquisition of Capital and $2.3 million to fund other business combinations. Additionally, $35.7 million was used to purchase machinery, equipment and other vehicles to service our business. These cash outflows were partially offset by $238.5 million in cash withdrawn from Industrea trust account in addition to proceeds from the sale of property, plant and equipment of $3.1 million.

 

Net cash used in financing activities was $361.6 million for the Successor Period. Financing activities during the Successor Period included cash inflows from $402.1 million in net borrowings from our new Term Loan Agreement, $23.3 million in net borrowings under the Company’s new ABL Credit Agreement, $174.3 million from the issuance of common shares, $1.4 million in proceeds from the exercise of stock options and an additional $25.0 million from the issuance of preferred stock. All of these cash inflows were used to fund business combinations and other operational activity such as equipment purchases. These cash inflows were offset by payments for redemptions of common stock totaling $231.4 million, $24.9 million for the payment of debt issuance costs (which are inclusive of any original issuance discounts) that were associated with the Term Loan Agreement and new ABL Credit Agreement, and $8.1 million in payments for underwriting fees.

 

Predecessor

 

Net cash provided by operating activities during the period from November 1, 2018 through December 5, 2018 was $7.9 million. The Company had a net loss of $22.6 million that included significant non-cash charges totaling $18.5 million as follows: (1) depreciation of $2.1 million, (2) prepayment penalty on early extinguishment of debt of $13.0 million, and (3) write off deferred debt issuance costs of $3.4 million. These amounts were partially offset by net cash outflows related to the following activity: (1) an increase of $0.3 million in inventory, (2) a $1.3 million increase in prepaid expenses and other current assets, (3) an increase of $4.4 million in our net deferred income taxes, (4) an increase of $17.3 million in accrued payroll, accrued expenses and other current liabilities, and (5) a $0.7 million decrease in accounts payable.

 

Net cash provided by operating activities for the fiscal year ended October 31, 2018 was $39.6 million. The Company had net income of $28.4 million that included significant non-cash charges totaling $27.3 million as follows: (1) depreciation of $17.7 million, (2) amortization of intangible assets of $7.9 million, and (3) amortization of deferred financing costs of $1.7 million. These amounts were partially offset by net cash outflows related to the following activity: (1) an increase of $7.5 million in trade receivables, (2) a $0.7 million increase in inventory, (3) a $1.4 million increase in prepaid expenses and other current assets, (4) an increase of $11.1 million in our net deferred income taxes, (6) an increase of $8.7 million in accrued payroll, accrued expenses and other current liabilities, (7) a decrease in income taxes payable of $0.4 million, and (8) a $1.8 million decrease in accounts payable.

 

We used $0.1 million to fund investing activities for the period from November 1, 2018 through December 5, 2018. We used $0.5 million to fund purchases of machinery, equipment and other vehicles to service our business. This was offset by $0.4 million in proceeds received from the sale of property, plant and equipment.

 

We used $49.5 million to fund investing activities for the fiscal year ended October 31, 2018. We used $31.7 million to fund purchases of machinery, equipment and other vehicles to service our business. We also used $21.0 million as part of the O'Brien acquisition completed in April of 2018.  These were offset by $3.2 million in proceeds received from the sale of property, plant and equipment.

 

We used $15.4 million to fund financing activities during the period from November 1, 2018 through December 5, 2018, all of which was from net payment activity under our revolving credit facility.

 

Net cash used in financing activities was $13.0 million for the fiscal year ended October 31, 2018. Financing activities for this period included a $15.6 million cash inflow from a bond offering to finance the O’Brien asset purchase. This was offset by net payments of $2.4 million on our revolving credit facility and $0.2 million in payments on our capital lease obligations.

 

 

Off-Balance Sheet Arrangements

 

We do not currently have any off-balance sheet arrangements that have had or are reasonably likely to have a material current or future effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources. From time to time, we enter into non-cancellable operating leases that are not reflected on our balance sheet. At October 31, 2019, we had $1.5 million of undrawn letters of credit outstanding.

 

Non-GAAP Measures (EBITDA and Adjusted EBITDA)

 

We calculate EBITDA by taking GAAP net income and adding back interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is calculated by taking EBITDA and adding back transaction expenses, loss on debt extinguishment, stock-based compensation, other income, net, and other adjustments. We believe these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends related to our financial condition and results of operations, as a tool for investors to use in evaluating our ongoing operating results and trends and in comparing our financial measures with competitors who also present similar non-GAAP financial measures. In addition, these measures (1) are used in quarterly and annual financial reports prepared for management and our board of directors and (2) help management to determine incentive compensation. EBITDA and Adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for performance measures calculated under GAAP. These non-GAAP measures exclude certain cash expenses that we are obligated to make. In addition, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently or may not calculate it at all, which limits the usefulness of EBITDA and Adjusted EBITDA as comparative measures. Transaction expenses represent expenses for legal, accounting, and other professionals that were engaged in the completion of various acquisitions. Transaction expenses can be volatile as they are primarily driven by the size of a specific acquisition. As such, we exclude these amounts from adjusted EBITDA for comparability across periods. Other adjustments include severance expenses, director fees, expenses related to being a newly publicly-traded company and other non-recurring costs.

 

                   

S/P Combined

         
   

Successor

   

Predecessor

   

(non-GAAP)

   

Predecessor

 

(in thousands)

 

December 6, 2018 through October 31, 2019

    November 1, 2018 through December 5, 2018     Year Ended October 31, 2019     Year Ended October 31, 2018  

Consolidated

                               

Net income (loss)

  $ (9,912 )   $ (22,575 )   $ (32,487 )   $ 28,382  

Interest expense, net

    34,880       1,644       36,524       21,425  

Income tax expense (benefit)

    (3,303 )     (4,192 )     (7,495 )     (9,784 )

Depreciation and amortization

    52,652       2,713       55,365       25,623  

EBITDA

    74,317       (22,410 )     51,907       65,646  

Transaction expenses

    1,521       14,167       15,688       7,590  

Loss on debt extinguishment

    -       16,395       16,395       -  

Stock-based compensation

    3,619       -       3,619       281  

Other income, net

    (47 )     (6 )     (53 )     (55 )

Other adjustments

    6,496       1,442       7,938       5,688  

Adjusted EBITDA

  $ 85,906     $ 9,588     $ 95,494     $ 79,150  

 

 

   

Successor

   

Predecessor

   

S/P Combined (non-GAAP)

   

Predecessor

 

(in thousands)

 

December 6, 2018 through October 31, 2019

    November 1, 2018 through December 5, 2018     Year Ended October 31, 2019     Year Ended October 31, 2018  

U.S. Concrete Pumping

                               

Net income (loss)

  $ (11,031 )   $ (25,252 )   $ (36,283 )   $ 13,955  

Interest expense, net

    32,173       1,154       33,327       17,247  

Income tax expense (benefit)

    (6,658 )     (2,102 )     (8,760 )     (11,473 )

Depreciation and amortization

    32,245       1,635       33,880       15,237  

EBITDA

    46,729       (24,565 )     22,164       34,966  

Transaction expenses

    1,521       14,167       15,688       7,590  

Loss on debt extinguishment

    -       16,395       16,395       -  

Stock-based compensation

    3,619       -       3,619       281  

Other income, net

    (45 )     (6 )     (51 )     (55 )

Other adjustments

    4,245       761       5,006       4,011  

Adjusted EBITDA

  $ 56,069     $ 6,752     $ 62,821     $ 46,793  

 

   

Successor

   

Predecessor

   

S/P Combined (non-GAAP)

   

Predecessor

 

(in thousands)

 

December 6, 2018 through October 31, 2019

    November 1, 2018 through December 5, 2018     Year Ended October 31, 2019     Year Ended October 31, 2018  

U.K. Operations

                               

Net income (loss)

  $ 1,123     $ 158     $ 1,281     $ 3,018  

Interest expense, net

    2,705       490       3,195       4,173  

Income tax expense (benefit)

    538       49       587       503  

Depreciation and amortization

    8,807       890       9,697       8,060  

EBITDA

    13,173       1,587       14,760       15,754  

Transaction expenses

    -       -       -       -  

Loss on debt extinguishment

    -       -       -       -  

Stock-based compensation

    -       -       -       -  

Other income, net

    -       -       -       -  

Other adjustments

    861       73       934       998  

Adjusted EBITDA

  $ 14,034     $ 1,660     $ 15,694     $ 16,752  

 

 

   

Successor

   

Predecessor

   

S/P Combined (non-GAAP)

   

Predecessor

 

(in thousands)

 

December 6, 2018 through October 31, 2019

    November 1, 2018 through December 5, 2018     Year Ended October 31, 2019     Year Ended October 31, 2018  

U.S. Concrete Waste Management Services

                               

Net income (loss)

  $ (1,520 )   $ 2,009     $ 489     $ 9,634  

Interest expense, net

    2       -       2       1  

Income tax expense (benefit)

    2,485       (1,784 )     701       846  

Depreciation and amortization

    10,871       163       11,034       2,078  

EBITDA

    11,838       388       12,226       12,559  

Transaction expenses

    -       -       -       -  

Loss on debt extinguishment

    -       -       -       -  

Stock-based compensation

    -       -       -       -  

Other income, net

    (2 )     -       (2 )     -  

Other adjustments

    1,342       611       1,953       679  

Adjusted EBITDA

  $ 13,178     $ 999     $ 14,177     $ 13,238  

 

   

Successor

   

Predecessor

   

S/P Combined (non-GAAP)

   

Predecessor

 

(in thousands)

 

December 6, 2018 through October 31, 2019

    November 1, 2018 through December 5, 2018     Year Ended October 31, 2019     Year Ended October 31, 2018  

Corporate

                               

Net income (loss)

  $ 1,516     $ 510     $ 2,026     $ 1,775  

Interest expense, net

    -       -       -       4  

Income tax expense (benefit)

    332       (355 )     (23 )     340  

Depreciation and amortization

    729       25       754       248  

EBITDA

    2,577       180       2,757       2,367  

Transaction expenses

    -       -       -       -  

Loss on debt extinguishment

    -       -       -       -  

Stock-based compensation

    -       -       -       -  

Other income, net

    -       -       -       -  

Other adjustments

    48       (3 )     45       -  

Adjusted EBITDA

  $ 2,625     $ 177     $ 2,802     $ 2,367  

 

Jobs Act

 

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We have previously elected to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. If we were to subsequently elect instead to comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act.

 

 

Critical Accounting Policies and Estimates

 

In presenting our financial statements in conformity with U.S. GAAP, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material impact to our consolidated and combined results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. Presented below are those accounting policies that we believe require subjective and complex judgments that could potentially affect reported results. However, the majority of our business activities are in environments where we are paid a fee for a service performed, and therefore the results of the majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex.

 

Listed below are those estimates that we believe are critical and require the use of complex judgment in their application.

 

Goodwill and Intangible Assets

 

We assess potential impairment of our goodwill at least annually, generally as of August 31st. However, as a result of our stock price declining substantially during the fiscal 2019 third quarter, we concluded this qualified as a triggering event and thus performed a step one goodwill impairment analysis as of July 31, 2019. The results of our analysis indicated no impairment. The fair value of our U.S. Concrete Pumping, U.K. Operations and U.S. Concrete Waste Management Services reporting units exceeded their July 31, 2019 carrying values by approximately 4%, 3% and 4%, respectively. The fact that the fair values of these reporting units were largely in-line with their carrying values was consistent with expectations given the short period of time that had passed since goodwill was initially recorded on the Company’s balance sheet, primarily resulting from the Business Combination in December 2018 and the Capital acquisition in May 2019.

 

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. Estimating fair value of individual reporting units and indefinite-lived intangible assets requires us to make assumptions and estimates regarding out future plans, as well as industry and economic conditions. These assumptions and estimates include projected revenue, royalty rate, discount rate, tax amortization benefit and other market factors outside of our control.

 

Due to the interim quantitative test performed as of July 31, 2019, a quantitative test on our annual testing date of August 31, 2019 was not considered necessary. As there were no additional impairment indicators present as of year-end, the Company elected to perform a qualitative analysis for the three-month period ending October 31, 2019 instead and no triggering events were identified. For further information, refer to Note 8 to the Company’s audited financial statements included elsewhere in this Annual Report.

 

Income Taxes

 

We are subject to income taxes in the U.S., U.K. and other jurisdictions. Significant judgment is required in determining our provision for income tax, including evaluating uncertainties in the application of accounting principles and complex tax laws.

 

Income taxes include federal, state and foreign taxes currently payable and deferred taxes arising from temporary differences between income for financial reporting and income tax purposes. Deferred tax assets and liabilities are determined based on the differences between the financial statement balances and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to amounts expected to be realized.

 

 

Stock-Based Compensation. 

 

ASC Topic 718, Compensation—Stock Compensation (“ASC 718”) requires that share-based compensation expense be measured and recognized at an amount equal to the fair value of share-based payments granted under compensation arrangements. The fair value of each restricted stock award or stock option awards (with an exercise price of $0.01) that only contains a time-based vesting condition is equal to the market value of our common stock on the date of grant. A substantial portion of the Company's stock awards contain a market condition. For those awards, we estimate the fair value using a Monte Carlo simulation model whereby the fair value of the awards is fixed at grant date and amortized over the longer of the remaining performance or service period. The Monte Carlo Simulation valuation model incorporates the following assumptions: expected stock price volatility, the expected life of the awards, a risk-free interest rate and expected dividend yield. Significant judgment is required in determining the expected volatility of our common stock. Due to the limited history of trading of the Company’s common stock, the Company determined expected volatility based on a peer group of publicly traded companies.

 

The Company accounts for forfeitures as they occur.

 

Recently Issued Accounting Standards

 

For a detailed description of recently adopted and new accounting pronouncements refer to Note 2 to the Company’s audited financial statements included elsewhere in this Annual Report.

 

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable.

 

 

Item 8. Consolidated Financial Statements

 

TABLE OF CONTENTS

                        

  Page
Report of Independent Registered Public Accounting Firm 41
Consolidated Balance Sheets 42
Consolidated Statements of Operations 43
Consolidated Statements of Comprehensive Income 44
Consolidated Statements of Changes in Stockholders Equity 45
Consolidated Statements of Cash Flows 46
Notes to Consolidated Financial Statements 49

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

To the Stockholders and Board of Directors

Concrete Pumping Holdings, Inc.

 

 

Opinion on the Consolidated Financial Statements

 

We have audited the accompanying consolidated balance sheet of Concrete Pumping Holdings, Inc. (the “Company”) as of October 31, 2019 (Successor) and October 31, 2018 (Predecessor), the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for the period from December 6, 2018 through October 31, 2019 (Successor), for the period from November 1, 2018 through December 5, 2018 (Predecessor) and for the year ended October 31, 2018 (Predecessor), and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2019 (Successor) and October 31, 2018 (Predecessor), and the results of its operations and its cash flows for the period from December 6, 2018 to October 31, 2019 (Successor), for the period from November 1, 2018 to December 5, 2018 (Predecessor) and for the year ended October 31, 2018 (Predecessor), in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company was not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

/s/ BDO USA, LLP

 

We have served as the Company's auditor since 2018.

 

Dallas, Texas

January 14, 2020

 

 

 

Concrete Pumping Holdings, Inc.

Consolidated Balance Sheets

 

   

Successor

   

Predecessor

 
   

October 31,

   

October 31,

 

(in thousands, except per share amounts)

 

2019

   

2018

 

ASSETS

               
                 

Current assets:

               

Cash and cash equivalents

  $ 7,473     $ 8,621  

Trade receivables, net

    45,957       40,118  

Inventory

    5,254       3,810  
Income taxes receivable     697       -  

Prepaid expenses and other current assets

    3,378       3,947  

Total current assets

    62,759       56,496  
                 

Property, plant and equipment, net

    307,415       201,915  

Intangible assets, net

    222,293       36,429  

Goodwill

    276,088       74,656  

Other non-current assets

    1,813       -  

Deferred financing costs

    997       648  

Total assets

  $ 871,365     $ 370,144  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

               
                 

Current liabilities:

               

Revolving loan

  $ 23,555     $ 62,987  

Term loans, current portion

    20,888       -  

Current portion of capital lease obligations

    91       85  

Accounts payable

    7,408       5,192  

Accrued payroll and payroll expenses

    9,177       6,705  

Accrued expenses and other current liabilities

    28,106       18,830  

Income taxes payable

    1,153       1,152  

Deferred consideration

    1,708       1,458  

Total current liabilities

    92,086       96,409  
                 

Long term debt, net of discount for deferred financing costs

    360,938       173,470  

Capital lease obligations, less current portion

    477       568  

Deferred income taxes

    69,049       39,005  

Total liabilities

    522,550       309,452  
                 

Redeemable preferred stock, $0.001 par value, 2,342,264 shares issued and outstanding as of October 31, 2018 (liquidation preference of $11,239,060)

    -       14,672  

Zero-dividend convertible perpetual preferred stock, $0.0001 par value, 2,450,980 shares issued and outstanding as of October 31, 2019

    25,000       -  
                 

Stockholders' equity

               

Common stock, $0.001 par value, 15,000,000 shares authorized, 7,576,289 shares issued and outstanding as of October 31, 2018

    -       8  

Common stock, $0.0001 par value, 500,000,000 shares authorized, 58,253,220 shares issued and outstanding as of October 31, 2019

    6       -  

Additional paid-in capital

    350,489       18,724  

Accumulated other comprehensive income (loss)

    (599 )     584  

(Accumulated deficit) retained earnings

    (26,081 )     26,704  

Total stockholders' equity

    323,815       46,020  
                 

Total liabilities and stockholders' equity

  $ 871,365     $ 370,144  

 

See accompanying notes to consolidated financial statements.

 

 

 

Concrete Pumping Holdings, Inc.

Consolidated Statements of Operations

 

   

Successor

   

Predecessor

 

(in thousands, except share and per share amounts)

 

December 6, 2018 through October 31, 2019

    November 1, 2018 through December 5, 2018     Year Ended October 31, 2018  
                         

Revenue

  $ 258,565     $ 24,396     $ 243,223  
                         

Cost of operations

    143,512       14,027       136,876  

Gross profit

    115,053       10,369       106,347  
                         

General and administrative expenses

    91,914       4,936       58,789  

Transaction costs

    1,521       14,167       7,590  

Income (loss) from operations

    21,618       (8,734 )     39,968  
                         

Other income (expense):

                       

Interest expense, net

    (34,880 )     (1,644 )     (21,425 )

Loss on extinguishment of debt

    -       (16,395 )     -  

Other income, net

    47       6       55  

Total other income (expense)

    (34,833 )     (18,033 )     (21,370 )
                         

Income (loss) before income taxes

    (13,215 )     (26,767 )     18,598  
                         

Income tax expense (benefit)

    (3,303 )     (4,192 )     (9,784 )
                         

Net income (loss)

    (9,912 )     (22,575 )     28,382  
                         

Less preferred shares dividends

    (1,623 )     (126 )     (1,428 )

Less undistributed earnings allocated to preferred shares

    -       -       (6,365 )
                         

Income (loss) available to common shareholders

  $ (11,535 )   $ (22,701 )   $ 20,589  
                         

Weighted average common shares outstanding

                       

Basic

    41,445,508       7,576,289       7,576,289  

Diluted

    41,445,508       7,576,289       8,325,890  
                         

Net income (loss) per common share

                       

Basic

  $ (0.28 )   $ (3.00 )   $ 2.72  

Diluted

  $ (0.28 )   $ (3.00 )   $ 2.47  

 

See accompanying notes to consolidated financial statements.

 

 

 

Concrete Pumping Holdings, Inc.

Consolidated Statements of Comprehensive Income

 

   

Successor

   

Predecessor

 

(in thousands)

 

December 6, 2018 through October 31, 2019

    November 1, 2018 through December 5, 2018     Year Ended October 31, 2018  
                         

Net income (loss)

  $ (9,912 )   $ (22,575 )   $ 28,382  
                         

Other comprehensive income:

                       

Foreign currency translation adjustment

    (599 )     (674 )     (1,797 )
                         

Total comprehensive income (loss)

  $ (10,511 )   $ (23,249 )   $ 26,585  

 

See accompanying notes to consolidated financial statements.

 

 

 

Concrete Pumping Holdings, Inc.  

Consolidated Statements of Changes in Stockholders' Equity

 

   

Predecessor

 

(in thousands)

 

Common Stock

   

Additional Paid-In Capital

   

Accumulated Other Comprehensive Income

   

Retained Earnings (Accumulated Deficit)

   

Total

 

Balance at October 31, 2017

  $ 8     $ 18,443     $ 2,381     $ (1,678 )   $ 19,154  

Stock-based compensation

    -       281       -       -       281  

Net income

    -       -       -       28,382       28,382  

Foreign currency translation adjustment

    -       -       (1,797 )     -       (1,797 )

Balance at October 31, 2018

  $ 8     $ 18,724     $ 584     $ 26,704     $ 46,020  

Net loss

    -       -       -       (22,575 )     (22,575 )

Stock-based compensation

    -       27       -       -       27  

Foreign currency translation adjustment

    -       -       (674 )     -       (674 )

Balance at December 5, 2018

  $ 8     $ 18,751     $ (90 )   $ 4,129     $ 22,798  

   

Successor

 

(in thousands)

 

Common Stock

   

Additional Paid-In

   

Accumulated Other Comprehensive

   

Retained Earnings (Accumulated

         
   

Class A

   

Class B

   

Capital

   

Income

   

Deficit)

   

Total

 

Balance at December 6, 2018

  $ 0     $ 1     $ 12,433     $ -     $ (7,434 )   $ 5,000  

Redemption of Class A common stock

    (0 )     -       (12,433 )     -       (3,577 )     (16,010 )

Issuance of Class A common stock

    1       -       96,900       -       -       96,901  

Rollover of Class A common stock as a result of the Business Combination

    1       -       164,908       -       -       164,909  

Conversion of Class B common stock

    1       (1 )     -       -       -       -  

Net income (loss)

    -       -       -       -       (9,912 )     (9,912 )

Foreign currency translation adjustment

    -       -       -       (599 )     -       (599 )

Shares issued to acquire business

    -       -       1,150       -       -       1,150  

Stock-based compensation expense

    -       -       3,619       -       -       3,619  

Shares issued upon exercise of stock options and warrants

    -       -       1,370       -       -       1,370  

Shares issued upon awards of restricted stock

    1       -       (1 )     -       -       -  

Issuance of shares in exchange for warrants

    -       -       5,158       -       (5,158 )     -  

Shares issued upon public offering of Class A common stock

    2       -       77,385       -       -       77,387  

Balance at October 31, 2019

  $ 6     $ -     $ 350,489     $ (599 )   $ (26,081 )   $ 323,815  

 

See accompanying notes to consolidated financial statements.

 

 

 

Concrete Pumping Holdings, Inc. 

Consolidated Statements of Cash Flows

 

   

Successor

   

Predecessor

 

(in thousands)

 

December 6, 2018 through October 31, 2019

    November 1, 2018 through December 5, 2018    

Year Ended October 31, 2018

 

Net income (loss)

  $ (9,912 )   $ (22,575 )   $ 28,382  

Adjustments to reconcile net income to net cash provided by operating activities:

                       

Depreciation

    20,279       2,060       17,719  

Deferred income taxes

    (2,446 )     (4,355 )     (11,106 )

Amortization of deferred financing costs

    3,664       152       1,690  

Write off deferred debt issuance costs

    -       3,390       -  

Amortization of debt premium

    -       (11 )     (60 )

Amortization of intangible assets

    32,366       653       7,904  

Stock-based compensation expense

    3,619       27       281  

Prepayment penalty on early extinguishment of debt

    -       13,004       -  

Gains, net of losses, on the sale of property, plant and equipment

    (611 )     (166 )     (2,623 )

Accretion of contingent consideration

    207       -       527  

Net changes in operating assets and liabilities (net of acquisitions):

                       

Trade receivables, net

    (5,861 )     485       (7,469 )

Inventory

    (466 )     (294 )     (707 )

Prepaid expenses and other current assets

    (1,001 )     (1,283 )     (1,408 )

Income taxes payable, net

    (1,428 )     203       (381 )

Accounts payable

    (7,303 )     (654 )     (1,832 )

Accrued payroll, accrued expenses and other current liabilities

    (8,330 )     17,280       8,702  

Net cash provided by operating activities

    22,777       7,916       39,619  
                         

Cash flows from investing activities:

                       

Purchases of property, plant and equipment

    (35,736 )     (503 )     (31,738 )

Proceeds from sale of property, plant and equipment

    3,073       364       3,239  

Cash withdrawn from Industrea Trust Account

    238,474       -       -  

Acquisition of net assets, net of cash acquired - CPH acquisition

    (449,436 )     -       -  

Acquisition of net assets, net of cash acquired - Capital acquisition

    (129,218 )     -       -  

Acquisition of net assets, net of cash acquired - Other business combinations

    (2,257 )     -       (21,000 )

Net cash (used in) investing activities

    (375,100 )     (139 )     (49,499 )

 

See accompanying notes to consolidated financial statements.

 

 

Concrete Pumping Holdings, Inc.

Consolidated Statements of Cash Flows (Continued)

 

   

Successor

   

Predecessor

 
   

December 6, 2018 through October 31, 2019

    November 1, 2018 through December 5, 2018    

Year Ended October 31, 2018

 

Cash flows from financing activities:

                       

Premium proceeds on long term debt

    -       -       600  

Proceeds on long term debt

    417,000       -       15,000  

Payments on long term debt

    (14,906 )     -       -  

Proceeds on revolving loan

    222,213       4,693       237,195  

Payments on revolving loan

    (198,863 )     (20,056 )     (239,588 )

Payment of debt issuance costs

    (24,929 )     -       -  

Redemption of common shares

    (231,415 )     -       -  

Payments on capital lease obligations

    (78 )     (7 )     (194 )

Issuance of preferred shares

    25,000       -       -  

Payment of underwriting fees

    (8,050 )     -       -  

Issuance of common shares - Dec 2018

    96,900       -       -  

Issuance of common shares - May 2019

    77,387       -       -  

Proceeds on exercise of rollover incentive options

    1,370       -       -  

Net cash provided by (used in) financing activities

    361,629       (15,370 )     13,013  

Effect of foreign currency exchange rate on cash

    (1,837 )     (70 )     (1,437 )

Net increase (decrease) in cash

    7,469       (7,663 )     1,696  

Cash:

                       

Beginning of period

    4       8,621       6,925  

End of period

  $ 7,473     $ 958     $ 8,621  

 

See accompanying notes to consolidated financial statements.

 

 

Concrete Pumping Holdings, Inc.

Consolidated Statements of Cash Flows (Continued)

 

   

Successor

   

Predecessor

 

(in thousands)

 

December 6, 2018 through October 31, 2019

    November 1, 2018 through December 5, 2018    

Year Ended October 31, 2018

 

Supplemental cash flow information:

                       

Cash paid for interest

  $ 29,472     $ 201     $ 22,168  

Cash paid for income taxes

  $ 1,984     $ -