UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No.
CONCRETE PUMPING HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
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(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changes since last report)
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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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.
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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | | ☒ |
| Non-Accelerated Filer | ☐ | Smaller Reporting Company | |
| Emerging growth company | |
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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
As of March 10, 2021, the registrant had
CONCRETE PUMPING HOLDINGS, INC.
FORM 10-Q
FOR THE QUARTER ENDED January 31, 2021
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| Part I. Financial Information |
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| Item 1. |
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Consolidated Statements of Operations and Comprehensive Income |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Part II. Other Information |
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| Signatures | 54 | ||
PART I
ITEM 1. Unaudited Consolidated Financial Statements
Concrete Pumping Holdings, Inc.
Consolidated Balance Sheets
| (Unaudited) | ||||||||
| January 31, | October 31, | |||||||
| (in thousands except per share amounts) | 2021 | 2020 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Trade receivables, net | ||||||||
| Inventory | ||||||||
| Income taxes receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other non-current assets | ||||||||
| Deferred financing costs | ||||||||
| Total assets | $ | $ | ||||||
| Current liabilities: | ||||||||
| Revolving loan | $ | $ | ||||||
| Term loans, current portion | ||||||||
| Current portion of capital lease obligations | ||||||||
| Accounts payable | ||||||||
| Accrued payroll and payroll expenses | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Income taxes payable | ||||||||
| Total current liabilities | ||||||||
| Long term debt, net of discount for deferred financing costs | ||||||||
| Capital lease obligations, less current portion | ||||||||
| Deferred income taxes | ||||||||
| Total liabilities | ||||||||
| Zero-dividend convertible perpetual preferred stock, $ par value, shares issued and outstanding as of January 31, 2021 and October 31, 2020 | ||||||||
| Stockholders' equity | ||||||||
| Common stock, $ par value, shares authorized, and issued and outstanding as of January 31, 2021 and October 31, 2020, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements
Concrete Pumping Holdings, Inc.
Consolidated Statements of Operations
(Unaudited)
| Three Months Ended January 31, |
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| (in thousands, except share and per share amounts) |
2021 |
2020 |
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| Revenue | $ | $ | ||||||
| Cost of operations | ||||||||
| Gross profit | ||||||||
| General and administrative expenses | ||||||||
| Transaction costs | ||||||||
| Income from operations | ||||||||
| Other income (expense): |
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| Interest expense, net | ( |
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| Loss on extinguishment of debt | ( |
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| Other income, net | ||||||||
| Total other expense | ( |
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| Loss before income taxes | ( |
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| Income tax benefit | ( |
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| Net loss | ( |
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| Less accretion of liquidation preference on preferred stock | ( |
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| Net loss available to common shareholders | $ | ( |
) | $ | ( |
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| Weighted average common shares outstanding |
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| Basic | ||||||||
| Diluted | ||||||||
| Net loss per common share |
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| Basic | $ | ( |
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| Diluted | $ | ( |
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The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements
Concrete Pumping Holdings, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
| Three Months Ended January 31, |
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| (in thousands) |
2021 |
2020 |
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| Net loss | $ | ( |
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| Other comprehensive income: |
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| Foreign currency translation adjustment |
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| Total comprehensive loss | $ | ( |
) | $ | ( |
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The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements
Concrete Pumping Holdings, Inc.
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
| (in thousands) |
Common Stock |
Additional Paid-In Capital |
Treasury Stock |
Accumulated Other Comprehensive Income (loss) |
Accumulated Deficit |
Total |
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| Balance at October 31, 2019 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
| Stock-based compensation expense |
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| Shares issued upon exercise of stock options, net of shares used for tax withholding |
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| Net loss |
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| Foreign currency translation adjustment |
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| Balance at January 31, 2020 |
$ | $ | $ | ( |
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| (in thousands) | Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income (loss) | Accumulated Deficit | Total | ||||||||||||||||||
| Balance at October 31, 2020 | $ | $ | $ | ( |
) | $ | ( |
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| Stock-based compensation expense | ||||||||||||||||||||||||
| Shares issued upon exercise of stock options, net of shares used for tax withholding | ( |
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| Net loss | ( |
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| Foreign currency translation adjustment | ||||||||||||||||||||||||
| Balance at January 31, 2021 | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||
The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements
Concrete Pumping Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended January 31, |
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| (in thousands) |
2021 |
2020 |
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| Net loss | $ | ( |
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| Adjustments to reconcile net loss to net cash provided by operating activities: |
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| Depreciation | ||||||||
| Deferred income taxes | ( |
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| Amortization of deferred financing costs | ||||||||
| Amortization of intangible assets | ||||||||
| Stock-based compensation expense | ||||||||
| Loss on extinguishment of debt | ||||||||
| Net gain on the sale of property, plant and equipment | ( |
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| Payment of contingent consideration in excess of amounts established in purchase accounting | ( |
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| Net changes in operating assets and liabilities (net of acquisitions): | ||||||||
| Trade receivables, net | ||||||||
| Inventory |
( |
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| Prepaid expenses and other current assets | ( |
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| Income taxes payable, net | ( |
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| Accounts payable | ( |
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| Accrued payroll, accrued expenses and other current liabilities | ( |
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| Net cash provided by operating activities |
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| Cash flows from investing activities: |
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| Purchases of property, plant and equipment | ( |
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| Proceeds from sale of property, plant and equipment | ||||||||
| Net cash used in investing activities |
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| Cash flows from financing activities: | ||||||||
| Proceeds on long term debt | ||||||||
| Payments on long term debt | ( |
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| Proceeds on revolving loan | ||||||||
| Payments on revolving loan | ( |
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| Payment of debt issuance costs | ( |
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| Payments on capital lease obligations | ( |
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| Purchase of treasury stock | ( |
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| Payment of contingent consideration established in purchase accounting | ( |
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| Net cash provided by (used in) financing activities | ( |
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| Effect of foreign currency exchange rate on cash | ( |
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| Net decrease in cash and cash equivalents | ( |
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| Cash and cash equivalents: | ||||||||
| Beginning of period | ||||||||
| End of period | $ | $ | ||||||
The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements
Concrete Pumping Holdings, Inc.
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
| Three Months Ended January 31, |
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| (in thousands) |
2021 |
2020 |
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| Supplemental cash flow information: |
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| Cash paid for interest | $ | $ | ||||||
| Cash paid (refunded) for income taxes | $ | $ | ( |
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| Non-cash investing and financing activities: |
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| Equipment purchases included in accrued expenses and accounts payable | $ | $ | ||||||
The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements
Note 1. Organization and Description of Business
Organization
Concrete Pumping Holdings, Inc. (the “Company” or “Successor”) is a Delaware corporation headquartered in Thornton (near Denver), Colorado. The Consolidated Financial Statements include the accounts of Concrete Pumping Holdings, Inc. and its wholly owned subsidiaries including Brundage-Bone Concrete Pumping, Inc. (“Brundage-Bone”), Capital Pumping (“Capital”), Camfaud Group Limited (“Camfaud”), and Eco-Pan, Inc. (“Eco-Pan”).
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. (the "Predecessor") 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.
Nature of business
Brundage-Bone and Capital are concrete pumping service providers in the United States ("U.S.") and Camfaud is a concrete pumping service provider in the United Kingdom (“U.K.”). Their core business is the provision of concrete pumping services to general contractors and concrete finishing companies in the commercial, infrastructure and residential sectors. Most often equipment returns to a “home base” nightly and neither company contracts to purchase, mix, or deliver concrete. Brundage-Bone and Capital collectively have approximately
Eco-Pan provides industrial cleanup and containment services, primarily to customers in the construction industry in the U.S. and the U.K. 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 U.S. and shares an operating location in the U.K. with one of the Camfaud branches mentioned above, with its corporate headquarters in Thornton (near Denver), Colorado.
Seasonality
The Company’s sales are historically seasonal, with lower revenue volumes typically in the first half of the fiscal year and higher revenue volumes in the second half of each fiscal year. Such seasonality also causes the Company’s working capital cash flow requirements to vary from the first half of the fiscal year to the second half of the fiscal year and primarily depends on the variability of weather patterns with the Company generally having lower sales volume during the winter and spring months.
Impacts of COVID-19
In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a global pandemic and recommended containment and mitigation measures worldwide. The COVID-19 pandemic has rapidly changed market and economic conditions globally and may continue to create significant uncertainty in the macroeconomic environment. Such macroeconomic volatility, in addition to other unforeseen effects of this pandemic, has impacted our business, results of operations and overall financial performance. The Company has made adjustments to its operations and executed certain cost reduction initiatives as a result of the COVID-19 pandemic. For example, the Company has implemented certain short-term cost reductions, including headcount reductions, modified work schedules reducing hours where needed, and furloughs in limited locations.
In addition, the COVID-19 pandemic drove a sustained decline in the Company's stock price and a deterioration in general economic conditions in the fiscal 2020 second quarter, which qualified as a triggering event necessitating the evaluation of its goodwill and long-lived assets for indicators of impairment. As a result of the evaluation, the Company conducted a quantitative interim impairment test as of April 30, 2020 resulting in non-cash impairment charges of $
Despite recent progress in administration of vaccines, both the outbreak and the containment and mitigation measures have had and are likely to continue to have a serious adverse impact on the global economy, the severity and duration of which are uncertain. It is likely that government stabilization efforts will only partially mitigate the consequences to the economy. To date, the COVID-19 pandemic has primarily impacted revenue volumes in the U.K. and certain markets in the U.S. The full extent to which the COVID-19 pandemic will impact the Company’s business, financial condition, and results of operations in the future is highly uncertain and will be affected by a number of factors. These include the duration and extent of the pandemic; the duration and extent of imposed or recommended containment and mitigation measures; the extent, duration, and effective execution of government stabilization and recovery efforts, including those from the successful distribution of an effective vaccine; the impact of the pandemic on economic activity, including on construction projects and the Company’s customers’ demand for its services; the Company’s ability to effectively operate, including as a result of travel restrictions and mandatory business and facility closures; the ability of the Company’s customers to pay for services rendered; any further closures of the Company’s and the Company’s customers’ offices and facilities; and any additional project delays or shutdowns. Customers may also slow down decision-making, delay planned work or seek to terminate existing agreements. Any of these events may have a material adverse effect on the Company’s business, financial condition, and/or results of operations, including further impairment to our goodwill and intangible assets. The Company will continue to evaluate the effect of COVID-19 on its business.
Note 2. Summary of Significant Accounting Policies
Basis of presentation
The accompanying Unaudited Consolidated Financial Statements have been prepared, without audit, in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. The enclosed statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of the Company at January 31, 2021 and for all periods presented. All intercompany balances and transactions have been eliminated in consolidation.
Principles of consolidation
The Consolidated Financial Statements include all accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Significant estimates include accrued sales and use taxes, the liability for incurred but unreported claims under various partially self-insured polices, allowance for doubtful accounts, goodwill impairment analysis, valuation of share-based compensation and accounting for business combinations. Actual results may differ from those estimates, and such differences may be material to the Company’s consolidated financial statements.
Trade receivables
Trade receivables are carried at the original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts. Generally, the Company does not require collateral for their accounts receivable; however, the Company may file statutory liens or take other appropriate legal action when necessary on construction projects in which collection problems arise. A trade receivable is typically considered to be past due if any portion of the receivable balance is outstanding for more than 30 days. The Company does not charge interest on past-due trade receivables.
Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. The allowance for doubtful accounts was $
Inventory
Inventory consists primarily of replacement parts for concrete pumping equipment. Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. The Company evaluates inventory and records an allowance for obsolete and slow- moving inventory to account for cost adjustments to market. Based on management’s analysis,
Fair Value Measurements
The Financial Accounting Standard Board's (the “FASB”) standard on fair value measurements establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. This standard establishes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities.
Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
Deferred financing costs
Deferred financing costs representing third-party, non-lender debt issuance costs are deferred and amortized using the effective interest rate method over the term of the related long-term-debt agreement, and the straight-line method for the revolving credit agreement.
Debt issuance costs, including any original issue discounts, related to term loans or senior notes are reflected as a direct deduction from the carrying amount of the long-term debt liability that is included in long term debt, net of discount for deferred financing costs in the accompanying consolidated balance sheets. Debt issuance costs related to revolving credit facilities are capitalized and reflected in deferred financing in the accompanying consolidated balance sheets.
Goodwill
In accordance with ASC Topic 350, Intangibles–Goodwill and Other (“ASC 350”), the Company evaluates goodwill for possible impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company uses a two-step process to assess the realizability of goodwill. The first step is a qualitative assessment that analyzes current economic indicators associated with a particular reporting unit. For example, the Company analyzes changes in economic, market and industry conditions, business strategy, cost factors, and financial performance, among others, to determine if there are indicators of a significant decline in the fair value of a particular reporting unit. If the qualitative assessment indicates a stable or improved fair value, no further testing is required. If a qualitative assessment indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company will proceed to the quantitative second step where the fair value of a reporting unit is calculated based on weighted income and market-based approaches. If the fair value of a reporting unit is lower than its carrying value, an impairment to goodwill is recorded, not to exceed the carrying amount of goodwill in the reporting unit. As of January 31, 2021, no indicators of impairment have been identified.
Property, plant and equipment
Property, plant and equipment are recorded at cost. Expenditures for additions and betterments are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred; however, maintenance and repairs that improve or extend the life of existing assets are capitalized. The carrying amount of assets disposed of and the related accumulated depreciation are eliminated from the accounts in the year of disposal. Gains or losses from property and equipment disposals are recognized in the year of disposal. Property, plant and equipment is depreciated using the straight-line method over the following estimated useful lives:
| In Years | ||||
| Buildings and improvements | ||||
| Capital lease assets—buildings | ||||
| Furniture and office equipment | ||||
| Machinery and equipment | ||||
| Transportation equipment | ||||
Intangible assets
Intangible assets are recorded at cost or their estimated fair value (when acquired through a business combination) less accumulated amortization (if finite-lived).
Intangible assets with finite lives, except for customer relationships, are amortized on a straight-line basis over their estimated useful lives. Customer relationships are amortized on an accelerated basis over their estimated useful lives. Intangible assets with indefinite lives are not amortized but are subject to annual reviews for impairment.
Impairment of long-lived assets
ASC 360, Property, Plant and Equipment (ASC 360) requires other long-lived assets to be evaluated for impairment when indicators of impairment are present. If indicators are present, assets are grouped to the lowest level for which identifiable cash flows are largely independent of other asset groups and cash flows are estimated for each asset group over the remaining estimated life of each asset group. If the undiscounted cash flows estimated to be generated by those assets are less than the asset’s carrying amount, impairment is recognized in the amount of the excess of the carrying value over the fair value. indicators of impairment were identified as of January 31, 2021.
Revenue recognition
The Company generates revenues primarily from concrete pumping services in both the U.S. and U.K. Additionally, revenue is generated from the Company’s waste management business which consists of service fees charged to customers for the delivery of its pans and containers and the disposal of the concrete waste material.
The Company recognizes revenue from these businesses when all of the following criteria are met: (a) persuasive evidence of an arrangement exists, (b) the service has been performed or delivery has occurred, (c) the price is fixed or determinable, and (d) collectability is reasonably assured. The Company’s delivery terms for replacement part sales are FOB shipping point.
The Company imposes and collects sales taxes concurrent with its revenue-producing transactions with customers and remits those taxes to the various governmental authorities as prescribed by the taxing jurisdictions in which it operates. The Company presents such taxes in its consolidated statement of operations on a net basis.
Stock-based compensation
The Company follows ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense, based on estimated fair values, for all share-based awards made to employees and directors. The Company expenses the grant date fair value of the award in the consolidated statements of operations over the requisite service periods on a straight-line basis. The Company accounts for forfeitures as they occur in accordance with ASU No. 2016-09, Compensation—Stock Compensation (ASC 718): Improvements to Employee Share-Based Payment Accounting.
Income taxes
The Company complies with ASC 740, Income Taxes, which requires an asset and liability approach to financial reporting for income taxes.
The Company computes deferred income tax assets and liabilities annually for differences between the financial statements and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, carryback opportunities, and tax planning strategies in making the assessment. Income tax expense includes both the current income taxes payable or refundable and the change during the period in the deferred tax assets and liabilities. The tax benefit from an uncertain tax position is only recognized in the consolidated balance sheet if the tax position is more likely than not to be sustained upon an examination.
Camfaud files income tax returns in the U.K. Camfaud’s national statutes are generally open for one year following the statutory filing period.
Foreign currency translation
The functional currency of Camfaud is the Pound Sterling (GBP). The assets and liabilities of the Company's foreign subsidiaries are translated into U.S. Dollars using the period end exchange rates for the periods presented, and the consolidated statements of operations are translated at the average exchange rate for the periods presented. The resulting translation adjustments are recorded as a component of comprehensive income on the consolidated statements of comprehensive income and accumulated in other comprehensive income. The functional currency of our other subsidiaries is the United States Dollar.
Earnings per share
The Company calculates earnings per share in accordance with ASC 260, Earnings per Share. The two-class method of computing earnings per share is required for entities that have participating securities. The two-class method is an earnings allocation formula that determines earnings per share for participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings. The Company has two classes of stock: (1) Common Stock and (2) Participating Preferred Stock (“Preferred Stock”).
Basic earnings (loss) per common share is calculated by dividing net income (loss) attributable to common shareholders by the weighted average number of shares of Common Stock outstanding each period. Diluted earnings (loss) per common share is based on the weighted average number of shares outstanding during the period plus the common stock equivalents which would arise from the exercise of stock options outstanding using the treasury stock method and the average market price per share during the period. Common stock equivalents are not included in the diluted earnings (loss) per share calculation when their effect is antidilutive.
An anti-dilutive impact is an increase in earnings per share or a reduction in net loss per share resulting from the conversion, exercise, or contingent issuance of certain securities.
Business combinations
The Company applies the principles provided in ASC 805, Business Combinations ("ASC 805"), when a business is acquired. Tangible and intangible assets acquired and liabilities assumed are recorded at fair value and goodwill is recognized for any differences between the fair value of consideration transferred and the fair value of net assets acquired. Transaction costs for business combinations are expensed as incurred in accordance with ASC 805.
Concentrations
As of January 31, 2021 and October 31, 2020 there were significant vendors that the Company relied upon to purchase concrete pumping boom equipment. However, should the need arise, there are alternate vendors who can provide concrete pumping boom equipment.
Cash balances held at financial institutions may, at times, be in excess of federally insured limits. The Company places its temporary cash balances in high-credit quality financial institutions.
The Company’s customer base is dispersed across the U.S. and U.K. The Company performs ongoing evaluations of its customers’ financial condition and requires no collateral to support credit sales. During the periods described above, no customer represented 10 percent or more of sales or trade receivables.
Note 3. New Accounting Pronouncements
We have opted to take advantage of the extended transition period available to emerging growth companies pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) for new accounting standards.
Recently issued accounting pronouncements not yet effective
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASC 606) (“ASU 2014-09”), which is a comprehensive new revenue recognition model.
Under ASU 2014-09 and the related clarifying ASUs, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. Following the issuance of ASU 2020-05 that deferred the effective date for certain companies, ASU 2014-09 is effective for emerging growth companies that have elected to use private company adoption dates in annual reporting periods beginning after December 15, 2018 and interim reporting periods within annual reporting periods beginning after December 15, 2019 and is to be adopted using either a full retrospective or modified retrospective transition method. The Company expects to adopt the guidance under the modified retrospective approach during the fourth quarter of the fiscal year ending October 31, 2021. The Company is currently evaluating the impact of the adoption of the new standard but does not expect a significant impact on the consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which is codified in ASC 842, Leases (“ASC 842”) and supersedes current lease guidance in ASC 840, Leases. ASC 842 requires a lessee to recognize a right-of-use asset and a corresponding lease liability for substantially all leases. The lease liability will be equal to the present value of the remaining lease payments while the right-of-use asset will be similarly calculated and then adjusted for initial direct costs. In addition, ASC 842 expands the disclosure requirements to increase the transparency and comparability of the amount, timing and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU 2018-11, Leases ASC 842: Targeted Improvements, which allows entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.
The new standard is effective for emerging growth companies that have elected to use private company adoption dates for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company plans to adopt the new standard effective for the year ending October 31, 2022. The Company is currently evaluating the impact of the pending adoption of the new standard on the consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), This ASU, along with subsequently issued related ASUs, requires financial assets (or groups of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected, among other provisions. This ASU is effective for emerging growth companies that have elected to use private company adoption dates with annual and interim periods beginning after December 15, 2022, with early adoption permitted. The Company plans to adopt the new standard effective for the year ending October 31, 2022. The amendments of this ASU should be applied on a modified retrospective basis to all periods presented. The Company is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”). Specifically, to the extent the Company's debt agreements are modified to replace LIBOR with another interest rate index, ASU 2020-04 will permit the Company to account for the modification as a continuation of the existing contract without additional analysis. Companies may generally elect to apply the guidance for periods that include March 12, 2020 through December 31, 2022. The Company is evaluating the anticipated impact of this standard on its condensed consolidated financial statements as well as timing of adoption.
Note 4. Fair Value Measurement
The carrying amounts of the Company's cash and cash equivalents, accounts receivable, accounts payable and current accrued liabilities approximate their fair value due to the short-term maturity of these instruments. The Company’s outstanding obligations on its ABL credit facility are deemed to be at fair value as the interest rates on these debt obligations are variable and consistent with prevailing rates. The Company believes the carrying values of its capital lease obligations represent fair value.
The Company's long-term debt instruments are recorded at their carrying values in the consolidated balance sheet, which may differ from their respective fair values. The fair values of the long-term debt instruments are derived from Level 2 inputs. The fair value amount of the long-term debt instruments at January 31, 2021 and at October 31, 2020 is presented in the table below based on the prevailing interest rates and trading activity of the Term loans or Senior Notes.
| January 31, |
October 31, |
|||||||||||||||
| 2021 |
2020 |
|||||||||||||||
| (in thousands) |
Carrying Value |
Fair Value |
Carrying Value |
Fair Value |
||||||||||||
| Term loans | $ | $ | $ | $ | ||||||||||||
| Senior notes | $ | $ | $ | $ | ||||||||||||
| Capital lease obligations | $ | $ | $ | $ | ||||||||||||
In connection with the acquisition of Camfaud in November 2016, former Camfaud shareholders were eligible to receive earnout payments (“deferred consideration”) of up to $
The Company's non-financial assets, which primarily consist of property and equipment, goodwill and other intangible assets, are required to be carried at fair value on a recurring basis and are reported at carrying value. However, on a periodic basis or whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable (and at least annually for goodwill and indefinite lived intangibles), non-financial instruments are assessed for impairment and, if applicable, written down to and recorded at fair value.
Note 5. Prepaid Expenses and Other Current Assets
The significant components of prepaid expenses and other current assets at January 31, 2021 and at October 31, 2020 are comprised of the following:
| January 31, |
October 31, |
|||||||
| (in thousands) |
2021 |
2020 |
||||||
| Prepaid insurance | $ | $ | ||||||
| Prepaid licenses and deposits | ||||||||
| Prepaid rent | ||||||||
| Other current assets and prepaids | ||||||||
| Total prepaid expenses and other current assets |
$ | $ | ||||||
Note 6. Property, Plant and Equipment
The significant components of property, plant and equipment at January 31, 2021 and at October 31, 2020 are comprised of the following:
| January 31, |
October 31, |
|||||||
| (in thousands) |
2021 |
2020 |
||||||
| Land, building and improvements | $ | $ | ||||||
| Capital leases—land and buildings | ||||||||
| Machinery and equipment | ||||||||
| Transportation equipment | ||||||||
| Furniture and office equipment | ||||||||
| Property, plant and equipment, gross |
||||||||
| Less accumulated depreciation | ( |
) | ( |
) | ||||
| Property, plant and equipment, net |
$ | $ | ||||||
Depreciation expense for the three-month periods ended January 31, 2021 and January 31, 2020 was $
Note 7. Goodwill and Intangible Assets
The Company recognized goodwill and certain intangible assets in connection with business combinations.
During the second quarter of fiscal 2020, the Company identified a triggering event resulting from a sustained decline in its stock price and deterioration in general economic conditions resulting from COVID-19. As a result, the Company, with the assistance of a third party valuation specialist, performed an interim impairment test on its indefinite-lived trade name intangible assets and goodwill as of April 30, 2020.
The valuation methodology used to value the trade-names was based on the relief-from-royalty method which is an income based measure that derives the value from total revenue growth projected and what percentage is attributable to the trade name. As a result of the analysis, the Company identified that the fair value of its Brundage-Bone Concrete Pumping trade name was approximately
The goodwill impairment test was performed on the Company’s U.S. Concrete Pumping, U.S. Concrete Waste Management Services, and U.K. Operations reporting units. The valuation methodologies used to value the reporting units included the discounted cash flow method (income approach) and the guideline public company method (market approach). As a result of the goodwill impairment analysis, the Company identified that the fair values of its U.S. Concrete Pumping and U.K. Operations reporting units were approximately
The factors leading to the impairment of the Company's goodwill and intangibles were primarily due to (1) lower anticipated future net revenues and earnings in its estimate of future cash flows resulting from COVID-19 and (2) a higher discount rate applied to future cash flows as a result of uncertainties of the overall economic impact from COVID-19. There is inherent uncertainty associated with key assumptions used by the Company in its impairment analyses including the duration of the economic downturn associated with COVID-19 and the recovery period.
There were no triggering events during the fiscal 2021 first quarter. The Company will continue to evaluate its goodwill and intangible assets in future quarters. Additional impairments may be recorded based on events and circumstances, including those related to COVID-19 discussed in Note 1.
The following table summarizes the composition of intangible assets at January 31, 2021 and at October 31, 2020:
| January 31, | October 31, | |||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||
| Gross | Foreign Currency | Net | Gross | Foreign Currency | Net | |||||||||||||||||||||||||||||||||||
| (in | Carrying | Accumulated | Translation | Carrying | Carrying | Accumulated | Translation | Carrying | ||||||||||||||||||||||||||||||||
| thousands) | Value | Impairment | Amortization | Adjustment | Amount | Value | Impairment | Amortization | Adjustment | Amount | ||||||||||||||||||||||||||||||
| Customer relationship | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Trade name | ( | ) | ( | ) | ( | ) | ( | ) | $ | |||||||||||||||||||||||||||||||
| Trade name (indefinite life) | ( | ) | - | ( | ) | - | $ | |||||||||||||||||||||||||||||||||
| Noncompete agreements | ( | ) | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Total intangibles | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
Amortization expense for the three-month periods ended January 31, 2021 and January 31, 2020 was $
| (in thousands) | ||||
| 2021 (excluding the period from November 1, 2020 to January 31, 2021) | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Thereafter | ||||
| Total | $ |
The changes in the carrying value of goodwill by reportable segment for the quarter ended January 31, 2021 are as follows:
| (in thousands) | U.S. Concrete Pumping | U.K. Operations | U.S. Concrete Waste Management Services | Corporate | Total | |||||||||||||||
| Balance at October 31, 2020 | $ | $ | $ | $ | $ | |||||||||||||||
| Foreign currency translation | ||||||||||||||||||||
| Balance at January 31, 2021 | $ | $ | $ | $ | $ | |||||||||||||||
Note 8. Long Term Debt and Revolving Lines of Credit
On January 28, 2021, Brundage-Bone Concrete Pumping Holdings Inc., a Delaware corporation (the “Issuer”) and a wholly-owned subsidiary of the Company (i) completed a private offering of $
Senior Notes
Summarized terms of the Senior Notes are as follows:
|
| ● | Provides for an original aggregate principal amount of $375.0 million; |
|
| ● | The Senior Notes will mature and be due and payable in full on February 1, 2026; |
|
| ● | The Senior Notes bear interest at a rate of 6.000% per annum, payable on February 1 and August 1 of each year; |
|
| ● | The Senior Notes are jointly and severally guaranteed on a senior secured basis by the Company, Concrete Pumping Intermediate Acquisition Corp. and each of the Issuer’s domestic, wholly-owned subsidiaries that are borrowers and certain of the guarantors under the ABL Facility (collectively, the "Guarantors"). The Senior Notes and the guarantees are secured on a second-priority basis by all the assets of the Issuer and the Guarantors that secure the obligations under the ABL Facility, subject to certain exceptions. The Senior Notes and the guarantees will be the Issuer’s and the Guarantors’ senior secured obligations, will rank equally with all of the Issuer’s and the Guarantors’ existing and future senior indebtedness and will rank senior to all of the Issuer’s and the Guarantors’ existing and future subordinated indebtedness. The Senior Notes are structurally subordinated to all existing and future indebtedness and liabilities of the Company’s subsidiaries that do not guarantee the Senior Notes; |
|
| ● | The Indenture includes certain covenants that limit, among other things, the Issuer’s ability and the ability of its restricted subsidiaries to: incur additional indebtedness and issue certain preferred stock; make certain investments, distributions and other restricted payments; create or incur certain liens; merge, consolidate or transfer all or substantially all assets; enter into certain transactions with affiliates; and sell or otherwise dispose of certain assets. |
The outstanding principal amount of Senior Notes as of January 31, 2021 was $
ABL Facility
A comparison of terms of the ABL Facility before and immediately after the amendment are as follows:
| Dated December 6, 2018 | As of January 28, 2021 | |
| Borrowing availability in U.S. Dollars and GBP up to a maximum of $ |
| Borrowing availability in U.S. Dollars and GBP up to a maximum of $ |
| Borrowing capacity available for standby letters of credit of up to $ |
| Same;
|
| All loans advanced will mature and be due and payable in full on December 6, 2023; |
| All loans advanced will mature and be due and payable in full on January 28, 2026; |
| Amounts borrowed may be repaid at any time, subject to the terms and conditions of the agreement; |
| Same; |
| Borrowings in U.S. Dollars and GBP bear interest at either (1) an adjusted LIBOR rate or (2) a base rate, in each case plus an applicable margin currently set at |
| Borrowings in U.S. Dollars and GBP bear interest at either (1) an adjusted LIBOR rate or (2) a base rate, in each case plus an applicable margin currently set at |
| U.S. ABL Facility obligations will be 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; |
| US ABL Facility obligations will be secured by a first-priority perfected security interest in substantially all the assets of the Issuer, together with Brundage-Bone Concrete Pumping, Inc., Eco-Pan, Inc., Capital Pumping LP (collectively, the "US ABL Borrowers") and each of the Company's wholly-owned domestic subsidiaries (the "US ABL Guarantors"), subject to certain exceptions; |
| U.K. ABL Facility obligations will be 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 |
| UK ABL Facility obligations will be secured by a first priority perfected security interest in substantially all assets of Camfaud Concrete Pumps Limited and Premier Concrete Pumping Limited, each of the Company's wholly-owned UK subsidiaries, and by each of the US ABL Borrowers and the US ABL Guarantors, subject to certain exceptions; |
| The ABL Facility also includes (i) a springing financial covenant (fixed charges 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. |
| Same. |
The outstanding balance under the amended ABL Facility as of January 31, 2021 was $
Term Loan Agreement
Summarized terms of the Term Loan Agreement are as follows:
|
| ● | Provides for an original aggregate principal amount of $ |
|
| ● | The initial term loans advanced will mature and be due and payable in full seven years after the Closing Date, with principal amortization payments in an annual amount equal to |
|
| ● | 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 |
|
| ● | 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 Facility priority collateral and (ii) a second priority perfected lien on substantially all ABL Facility priority collateral, in each case subject to customary exceptions and limitations; |
|
| ● | The Term Loan Agreement includes certain non-financial covenants. |
As discussed above, all outstanding borrowings under the Term Loan Agreement were repaid on January 28, 2021. The pay-off of the term loan were treated as a debt extinguishment while the amended ABL facility was treated as a debt modification. In accordance with debt extinguishment accounting rules, the Company recorded $
The table below is a summary of the composition of the Company’s long-term debt balances at January 31, 2021 and at October 31, 2020.
| January 31, | October 31, | |||||||
| (in thousands) | 2021 | 2020 | ||||||
| Revolving loan | $ | $ | ||||||
| Short term portion of term loan | ||||||||
| Long term portion of term loan | ||||||||
| Senior notes - all long term | ||||||||
| Total debt, gross | ||||||||
| Less unamortized deferred financing costs | ( | ) | ( | ) | ||||
| Total debt, net of unamortized deferred financing costs | $ | $ | ||||||
Note 9. Accrued Payroll and Payroll Expenses
The following table summarizes accrued payroll and expenses at January 31, 2021 and at October 31, 2020:
| January 31, |
October 31, |
|||||||
| (in thousands) |
2021 |
2020 |
||||||
| Accrued vacation | $ | $ | ||||||
| Accrued payroll | ||||||||
| Accrued bonus | ||||||||
| Other accrued | ||||||||
| Total accrued payroll and payroll expenses |
$ | $ | ||||||
Note 10. Accrued Expenses and Other Current Liabilities
The following table summarizes accrued expenses and other current liabilities at January 31, 2021 and at October 31, 2020:
| January 31, |
October 31, |
|||||||
| (in thousands) |
2021 |
2020 |
||||||
| Accrued insurance | $ | $ | ||||||
| Accrued interest | ||||||||
| Accrued equipment purchases | ||||||||
| Accrued sales and use tax | ||||||||
| Accrued property taxes | ||||||||
| Accrued professional fees | ||||||||
| Accrued due to related party | ||||||||
| Other | ||||||||
| Total accrued expenses and other liabilities |
$ | $ | ||||||
Note 11. Income Taxes
For the first quarter ended January 31, 2021, the Company recorded an income tax benefit of $
At January 31, 2021 and October 31, 2020, we had deferred tax liabilities, net of deferred tax assets, of $
The Company had unrecognized tax benefits of $
Note 12. Commitments and Contingencies
Insurance
As of January 31, 2021 and October 31, 2020, the Company was partially insured for automobile, general and worker's compensation liability. The Company has accrued $
The Company offers employee health benefits via a partially self-insured medical benefit plan. Participant claims exceeding certain limits are covered by a stop-loss insurance policy. As of January 31, 2021 and October 31, 2020, the Company had accrued $
Litigation
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.
Letters of credit
The ABL Facility provides for up to $
Note 13. Stockholders’ Equity
The Company’s amended and restated certificate of incorporation authorizes the issuance of
| ● |
|
| ● |
|
| ● |
|
On May 14, 2019, in order to finance a portion of the purchase price for the acquisition of Capital, the Company completed a public offering of
As discussed below, on April 29, 2019,
The Company’s Series A Preferred Stock does not pay dividends and is convertible (effective June 6, 2019) into shares of the Company’s common stock at a ratio (subject to customary adjustments). The Company has the right to elect to redeem all or a portion of the Series A Preferred Stock at its election after December 6, 2022 for cash at a redemption price equal to the amount of the principal investment plus an additional cumulative amount that will accrue at an annual rate of
Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. The preferred stock contains a redemption feature contingent upon a change in control which is not solely within the control of the Company, and as such, the preferred stock is presented outside of permanent equity.
Warrant Exchange
On April 1, 2019, the Company commenced an offer to each holder of its publicly traded warrants (the “public warrants”) and private placement warrants that were issued in connection with Industrea’s initial public offering on April 17, 2017 (the “private warrants”) to receive
On April 26, 2019, a total of
Note 14. Stock-Based Compensation
The Company rolled forward certain vested options from the Predecessor (see discussion below) to
During 2019, pursuant to the Concrete Pumping Holdings, Inc. 2018 Omnibus Incentive Plan, the Company granted stock-based awards to certain employees in the U.S. and U.K. All awards in the U.S. are restricted stock awards while awards granted to employees in the U.K. are stock options with exercise prices of $
| (1) |
Time-based only – Awards vest in equal installments over a -year period. |
| (2) |
$13 market-based and time-based vesting – Awards will vest as to first condition once the Company’s stock reaches a closing price of $13.00 for 30 consecutive trading days. Once the first vesting condition is achieved, the stock award will then vest annually over a -year period. |
| (3) |
$16 market-based and time-based vesting – Awards will vest as to first condition once the Company’s stock reaches a closing price of $16.00 for 30 consecutive trading days. Once the first vesting condition is achieved, the stock award will then vest annually over a -year period. |
| (4) |
$19 market-based and time-based vesting – Awards will vest as to first condition once the Company’s stock reaches a closing price of $19.00 for 30 consecutive trading days. Once the first vesting condition is achieved, the stock award will then vest annually over a -year period. |
On October 29, 2020 almost all of the then-outstanding stock awards were modified as follows:
| (1) | 113 awards for |
| o | The price vesting targets of $ |
|
| o | The market-based awards were exchanged on a |
| (2) | 18 awards for |
| o | Each individual's total award was split into the following: (a) |
|
| o | In the aggregate, |
| (a) | ||
| (b) | ||
| (c) |
As a result of the modifications, and in accordance with ASC 718, the Company updated the fair value of each modified award to be equal to the following:
| ● | Unrecognized stock-based compensation expense as of October 29, 2020 immediately before the modification plus | |
| ● | The greater of $0 or the difference between fair value of new award immediately after modification less the fair value of old award immediately before modification |
The fair values for the above awards were calculated using a Monte Carlo simulation model and the updated fair value of the stock award is expensed over the new service period for the new award. As a result of the modifications, the Company recorded $
As of January 31, 2021, the Company has the following outstanding stock-based awards:
| (1) |
Time-based only – Awards vest in equal installments over a or -year period. |
| (2) |
$6 market-based and time-based vesting – Awards will vest as to first condition once the Company’s stock reaches a closing price of $6.00 for 30 consecutive trading days. Once the first vesting condition is achieved, the stock award will then vest 1/3 annually over a three-year period. |
| (3) |
$8 market-based and time-based vesting – Awards will vest as to first condition once the Company’s stock reaches a closing price of $8.00 for 30 consecutive trading days. Once the first vesting condition is achieved, the stock award will then vest 1/3 annually over a three-year period. |
| (4) |
$10 market-based and time-based vesting – Awards will vest as to first condition once the Company’s stock reaches a closing price of $10.00 for 30 consecutive trading days. Once the first vesting condition is achieved, the stock award will then vest 1/3 annually over a three-year period. |
Included in the table below is a summary of unvested awards at January 31, 2021, including the location, type of award, shares outstanding, unrecognized compensation expense, and the date that expense will be recognized through. In addition, while the table below provides a date through which expense will be recognized on a straight-line basis, if at such time the market-based stock awards vest earlier than the Monte Carlo simulation derived service period, expense recognition will be accelerated.
| Location |
Type of Award |
Shares Unvested at January 31, 2021 |
Weighted Average Fair Value |
Unrecognized Compensation Expense at January 31, 2021 |
Date Expense will be Recognized Through (Straight-Line Basis) |
||||||||||
| U.S. |
Time Based Only |
$ | $ | 12/6/2023 |
|||||||||||
| U.S. |
$6 Market/Time- Based |
$ | 1/22/2025 |
||||||||||||
| U.S. |
$8 Market/Time- Based |
$ | 5/1/2025 |
||||||||||||
| U.S. |
$10 Market/Time- Based |
$ | 7/9/2025 |
||||||||||||
| U.S. |
$6 Market/Time- Based |
$ | 10/29/2020 |
||||||||||||
| U.S. |
$8 Market/Time- Based |
$ | 10/29/2020 |
||||||||||||
| U.S. |
$10 Market/Time- Based |
$ | 10/29/2020 |
||||||||||||
| U.S. |
$13 Market/Time- Based |
$ | 5/4/2024 |
||||||||||||
| U.S. |
$16 Market/Time- Based |
$ | 8/27/2024 |
||||||||||||
| U.S. |
$19 Market/Time- Based |
$ | 11/19/2024 |
||||||||||||
| U.K. |
Time Based Only |
$ | 12/6/2023 |
||||||||||||
| U.K. |
$6 Market/Time- Based |
$ | 1/22/2025 |
||||||||||||
| U.K. |
$8 Market/Time- Based |
$ | 5/1/2025 |
||||||||||||
| U.K. |
$10 Market/Time- Based |
$ | 7/9/2025 |
||||||||||||
| U.K. |
$6 Market/Time- Based |
$ | 10/29/2020 |
||||||||||||
| U.K. |
$8 Market/Time- Based |
$ | 10/29/2020 |
||||||||||||
| U.K. |
$10 Market/Time- Based |
$ | 10/29/2020 |
||||||||||||
| Total |
$ | ||||||||||||||
Note: The $13/$16/$19 Market/Time Based shares noted above relate to the shares not exchanged in the October 29, 2020 modification discussed above.
Stock-based compensation expense for the three-month periods ended January 31, 2021 and January 31, 2020 was $
Note 15. Earnings Per Share
The Company calculates earnings per share in accordance with ASC 260, Earnings Per Share. For purposes of calculating earnings (loss) per share (“EPS”), a company that has participating security holders (for example, holders of unvested restricted stock that have non-forfeitable dividend rights and the Company’s Series A Preferred Stock) is required to utilize the two-class method for calculating EPS unless the treasury stock method results in lower EPS. The two-class method is an allocation of earnings/(loss) between the holders of common stock and a company’s participating security holders. Under the two-class method, earnings/(loss) for the reporting period is calculated by taking the net income (loss) for the period, less both the dividends declared in the period on participating securities (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) for the period. Our common shares outstanding are comprised of shareholder owned common stock and shares of unvested restricted stock held by participating security holders. Basic EPS is calculated by dividing income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding, excluding participating shares. To calculate diluted EPS, basic EPS is further adjusted to include the effect of potentially dilutive stock options outstanding and Series A Preferred Stock outstanding as of the beginning of the period.
At January 31, 2021, the Company had outstanding (1)
The table below shows our basic and diluted EPS calculations for the three-month period ended January 31, 2021 and January 31, 2020:
| Three Months Ended January 31, |
||||||||
| (in thousands, except share and per share amounts) |
2021 |
2020 |
||||||
| Net loss (numerator): |
||||||||
| Net loss attributable to Concrete Pumping Holdings, Inc. | $ | ( |
) | $ | ( |
) | ||
| Less: Accretion of liquidation preference on preferred stock |
( |
) | ( |
) | ||||
| Net loss attributable to common stockholders (numerator for basic earnings per share) | $ | ( |
) | $ | ( |
) | ||
| Weighted average shares (denominator): |
||||||||
| Weighted average shares - basic |
||||||||
| Weighted average shares - diluted |
||||||||
| Basic loss per share | $ | ( |
) | $ | ( |
) | ||
| Diluted loss per share | $ | ( |
) | $ | ( |
) | ||
Note 16. Segment Reporting
The Company conducts business through the following reportable segments based on geography and the nature of services sold:
|
|
● |
U.S. Concrete Pumping – Consists of concrete pumping services sold to customers in the U.S. Business in this segment is primarily performed under the Brundage-Bone and Capital tradenames. |
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U.K. Operations – Consists of concrete pumping services and leasing of concrete pumping equipment to customers in the U.K. Business in this segment is primarily performed under the Camfaud Concrete Pumps and Premier Concrete Pumping tradenames. In addition to concrete pumping, we recently started operations of waste management services in the U.K. under the Eco-Pan tradename and the results of this business are included in this segment. This represents the Company’s foreign operations. |
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U.S. Concrete Waste Management Services – Consists of pans and containers rented to customers in the U.S. and the disposal of the concrete waste material services sold to customers in the U.S. Business in this segment is performed under the Eco-Pan tradename. |
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Corporate - Is primarily related to the intercompany leasing of real estate to certain of the U.S Concrete Pumping branches. |
Any differences between segment reporting and consolidated results are reflected in Corporate and/or Intersegment below.
The accounting policies of the reportable segments are the same as those described in Note 2. The Company’s Chief Operating Decision Maker (“CODM”) evaluates the performance of each segment based on revenue, and measures segment performance based upon EBITDA (earnings before interest, taxes, depreciation and amortization). Non-allocated interest expense and various other administrative costs are reflected in Corporate. Corporate assets primarily include cash and cash equivalents, prepaid expenses and other current assets, and real property. The following provides operating information about the Company’s reportable segments for the periods presented:
| Three Months Ended January 31, |
||||||||
| (in thousands) |
2021 |
2020 |
||||||
| Revenue |
||||||||
| U.S. Concrete Pumping | $ | $ | ||||||
| U.K. Operations | ||||||||
| U.S. Concrete Waste Management Services | ||||||||
| Corporate | ||||||||
| Intersegment | ( |
) | ( |
) | ||||
| Total revenue | $ | $ | ||||||
| Income (loss) before income taxes |
||||||||
| U.S. Concrete Pumping | $ | ( |
) | $ | ( |
) | ||
| U.K. Operations | ( |
) | ( |
) | ||||
| U.S. Concrete Waste Management Services | ||||||||
| Corporate | ||||||||
| Total income (loss) before income taxes | $ | ( |
) | $ | ( |
) | ||
| Three Months Ended January 31, |
||||||||
| (in thousands) |
2021 |
2020 |
||||||
| EBITDA |
||||||||
| U.S. Concrete Pumping | $ | ( |
) | $ | 14,862 | |||
| U.K. Operations | 1,958 | |||||||
| U.S. Concrete Waste Management Services | 3,250 | |||||||
| Corporate | 625 | |||||||
| Total EBITDA | $ | $ | ||||||
| Consolidated EBITDA reconciliation |
||||||||
| Net loss | $ | ( |
) | $ | (2,746 | ) | ||
| Interest expense, net | 9,503 | |||||||
| Income tax benefit | ( |
) | (1,147 | ) | ||||
| Depreciation and amortization | 15,085 | |||||||
| Total EBITDA | $ | $ | ||||||
| Three Months Ended January 31, | ||||||||
| (in thousands) | 2021 | 2020 | ||||||
| Depreciation and amortization | ||||||||
| U.S. Concrete Pumping | $ | $ | ||||||
| U.K. Operations | ||||||||
| U.S. Concrete Waste Management Services | ||||||||
| Corporate | ||||||||
| Total depreciation and amortization | $ | $ | ||||||
| Interest expense, net | ||||||||
| U.S. Concrete Pumping | $ | ( | ) | $ | ( | ) | ||
| U.K. Operations | ( | ) | ( | ) | ||||
| U.S. Concrete Waste Management Services | ||||||||
| Corporate | ||||||||
| Total interest expense, net | $ | ( | ) | $ | ( | ) | ||
| Transaction and debt extinguishment costs | ||||||||
| U.S. Concrete Pumping | $ | ( | ) | $ | ||||
| Corporate | ||||||||
| Total transaction and debt extinguishment costs | $ | ( | ) | $ | ||||
Total assets by segment for the periods presented are as follows:
| January 31, |
October 31, |
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| (in thousands) |
2021 |
2020 |
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| Total Assets |
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| U.S. Concrete Pumping | $ | $ | ||||||
| U.K. Operations | ||||||||
| U.S. Concrete Waste Management Services | ||||||||
| Corporate | ||||||||
| Intersegment | ( |
) | ( |
) | ||||
| Total assets | $ | $ | ||||||
The U.S. and U.K. were the only regions that accounted for more than 10% of the Company’s revenue for the periods presented. There was no single customer that accounted for more than 10% of revenue for the periods presented. Revenue for the periods presented and long lived assets as of January 31, 2021 and October 31, 2020 are as follows:
| Three Months Ended January 31, |
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| (in thousands) |
2021 |
2020 |
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| Revenue by Geography | ||||||||
| U.S. | $ | $ | ||||||
| U.K. | ||||||||
| Total revenue | $ | $ | ||||||
| January 31, |
October 31, |
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| (in thousands) |
2021 |
2020 |
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| Long Lived Assets |
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| U.S. | $ | $ | ||||||
| U.K. | ||||||||
| Total long lived assets | $ | $ | ||||||
Note 17. Related Party Transaction
During fiscal years 2016 and 2017, the Company paid federal income taxes totaling $
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following management’s discussion and analysis together with Concrete Pumping Holdings, Inc.’s (the “Company”, “we”, “us”, “our” or “Successor”) Unaudited Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report.
Cautionary Statement Concerning Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q 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 operations, 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 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. Additionally, information about issues that could lead to material changes in performance and risk factors that have the potential to affect us is contained under the caption “Risk Factors” in our Form 10-K filed with the SEC on January 12, 2021.
Business Overview
The Company is a Delaware corporation headquartered in Thornton (near Denver), Colorado. The unaudited 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.
U.S. Concrete Pumping
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.
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 approximately 30 branch locations throughout the U.K., with its corporate headquarters in Epping (near London), England. In addition, during the third quarter of fiscal 2019, we started concrete waste management operations under our Eco-Pan brand name in the U.K. and currently operate from a shared Camfaud location.
Corporate
Our Corporate segment is primarily related to the intercompany leasing of real estate to certain of our U.S Concrete Pumping branches.
Impacts of COVID-19
In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a global pandemic and recommended containment and mitigation measures worldwide. The COVID-19 pandemic has rapidly changed market and economic conditions globally and may continue to create significant uncertainty in the macroeconomic environment. Such macroeconomic volatility, in addition to other unforeseen effects of this pandemic, has impacted our business, results of operations and overall financial performance. We actively monitor and respond to developments relating to ongoing COVID-19 pandemic. As part of our actions, we have made adjustments to our operations and executed certain cost reduction initiatives. For example, we have implemented certain short-term cost reductions, including headcount reductions, modified work schedules reducing hours where needed, and furloughs in limited locations.
In addition, the COVID-19 pandemic drove a sustained decline in our stock price and a deterioration in general economic conditions in the fiscal 2020 second quarter, which qualified as a triggering event necessitating the evaluation of our goodwill and long-lived assets for indicators of impairment. As a result of the evaluation, we conducted a quantitative interim impairment test as of April 30, 2020 resulting in non-cash impairment charges of $43.5 million and $14.4 million to our U.S. Concrete Pumping and U.K. Operations reporting units, respectively. Through January 31, 2021, no subsequent triggering events have been identified. We will continue to evaluate our goodwill and intangible assets in future quarters. Additional impairments may be recorded in the future based on events and circumstances, including those related to COVID-19 discussed above.
Despite recent progress in administration of vaccines, both the outbreak and the containment and mitigation measures have had and are likely to continue to have a serious adverse impact on the global economy, the severity and duration of which are uncertain. It is likely that government stabilization efforts will only partially mitigate the consequences to the economy. To date, the COVID-19 pandemic has primarily impacted revenue volumes in the U.K. and certain markets in the U.S. The full extent to which the COVID-19 pandemic will impact the Company’s business, financial condition, and results of operations in the future is highly uncertain and will be affected by a number of factors. These include the duration and extent of the pandemic; the duration and extent of imposed or recommended containment and mitigation measures; the extent, duration, and effective execution of government stabilization and recovery efforts, including those from the successful distribution of an effective vaccine; the impact of the pandemic on economic activity, including on construction projects and our customers’ demand for our services; our ability to effectively operate, including as a result of travel restrictions and mandatory business and facility closures; the ability of our customers to pay for services rendered; any further closures of the Company's or our customers’ offices and facilities; and any additional project delays or shutdowns. Customers have and may continue to slow down decision-making, delay planned work or seek to terminate existing agreements. Any of these events may have a material adverse effect on our business, financial condition, and/or results of operations, including further impairment to our goodwill and intangible assets. We will continue to evaluate the effect of COVID-19 on our business.
Notes Offering
In January 2021, we announced that Brundage-Bone Concrete Pumping Holdings Inc., a wholly-owned subsidiary of the Company, closed its private offering of $375.0 million in aggregate principal amount of senior secured second lien notes due 2026 (the “Se