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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

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

 

For the quarterly period ended January 31, 2022

OR

 

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

 

Commission File No. 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 Avenue, Suite A-5

Thornton, Colorado 80229

(Address of principal executive offices, including zip code)

 

(303) 289-7497

(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 Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

BBCP

The Nasdaq Capital Market

 

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 (§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.

 

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 ☒

 

As of March 8, 2022, the registrant had 56,740,516 shares of common stock outstanding.

 

 

 

 
 

CONCRETE PUMPING HOLDINGS, INC.

FORM 10-Q

FOR THE QUARTER ENDED January 31, 2022

 

 

 

 

Page

Part I. Financial Information

 

 

 

 

 

Item 1.

Unaudited Consolidated Financial Statements:

 

 

 

Consolidated Balance Sheets

3

 

 

Consolidated Statements of Operations and Comprehensive Income

4

 

 

Consolidated Statements of Changes in Stockholders Equity

6

 

 

Consolidated Statements of Cash Flows

7

 

 

Notes to Unaudited Consolidated Financial Statements

9

 

Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

30

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

46

 

Item 4.

Controls and Procedures

46

 

 

 

 

Part II. Other Information

 

 

 

 

 

 

Item 1.

Legal Proceedings

47

 

Item 1A.

Risk Factors

47

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

 

Item 3.

Defaults Upon Senior Securities

47

 

Item 4.

Mine Safety Disclosures

47

 

Item 5.

Other Information

47

 

Item 6.

Exhibits

48

 

 

 

 

  Signatures   49

 

2

 

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)

 

2022

  

2021

 
         

Current assets:

        

Cash and cash equivalents

 $2,787  $9,298 

Trade receivables, net

  48,203   49,034 

Inventory

  5,142   4,902 

Income taxes receivable

  314   275 

Prepaid expenses and other current assets

  10,420   4,110 

Total current assets

  66,866   67,619 
         

Property, plant and equipment, net

  357,671   337,771 

Intangible assets, net

  153,572   158,539 

Goodwill

  224,193   224,700 

Other non-current assets

  2,056   2,168 

Deferred financing costs

  1,758   1,868 

Total assets

 $806,116  $792,665 
         
         

Current liabilities:

        

Revolving loan

 $16,208  $990 

Current portion of capital lease obligations

  104   103 

Accounts payable

  7,462   10,706 

Accrued payroll and payroll expenses

  8,768   12,226 

Accrued expenses and other current liabilities

  28,094   23,940 

Income taxes payable

  393   274 

Total current liabilities

  61,029   48,239 
         

Long term debt, net of discount for deferred financing costs

  369,432   369,084 

Capital lease obligations, less current portion

  251   278 

Deferred income taxes

  70,215   70,566 

Warrant liability

  16,923   16,923 

Total liabilities

  517,850   505,090 
         

Zero-dividend convertible perpetual preferred stock, $0.0001 par value, 2,450,980 shares issued and outstanding as of January 31, 2022 and October 31, 2021

  25,000   25,000 
         

Stockholders' equity

        

Common stock, $0.0001 par value, 500,000,000 shares authorized, 56,700,148 and 56,564,642 issued and outstanding as of January 31, 2022 and October 31, 2021, respectively

  6   6 

Additional paid-in capital

  375,754   374,272 

Treasury stock

  (995)  (461)

Accumulated other comprehensive income

  2,231   3,671 

Accumulated deficit

  (113,730)  (114,913)

Total stockholders' equity

  263,266   262,575 
         

Total liabilities and stockholders' equity

 $806,116  $792,665 

 

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements

 

3

 

Concrete Pumping Holdings, Inc.

Consolidated Statements of Operations

(Unaudited)

 

  

Three Months Ended January 31,

 

(in thousands, except share and per share amounts)

 

2022

  

2021

 
         

Revenue

 $85,448  $70,421 
         

Cost of operations

  51,321   40,558 

Gross profit

  34,127   29,863 
         

General and administrative expenses

  26,721   22,388 

Transaction costs

  21   29 

Income from operations

  7,385   7,446 
         

Other income (expense):

        

Interest expense, net

  (6,261)  (6,900)

Loss on extinguishment of debt

  -   (15,510)

Change in fair value of warrant liabilities

  -   - 

Other income, net

  37   26 

Total other expense

  (6,224)  (22,384)
         

Income (loss) before income taxes

  1,161   (14,938)
         

Income tax benefit

  (22)  (2,648)
         

Net income (loss)

  1,183   (12,290)
         

Less accretion of liquidation preference on preferred stock

  (441)  (507)
         

Income (loss) available to common shareholders

 $742  $(12,797)
         

Weighted average common shares outstanding

        

Basic

  53,667,290   53,146,103 

Diluted

  54,712,478   53,146,103 
         

Net income (loss) per common share

        

Basic

 $0.01  $(0.24)

Diluted

 $0.01  $(0.24)

 

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements

 

4

 

Concrete Pumping Holdings, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

 

   

Three Months Ended January 31,

 

(in thousands)

 

2022

   

2021

 
                 

Net income (loss)

  $ 1,183     $ (12,290 )
                 

Other comprehensive income (loss):

               

Foreign currency translation adjustment

    (1,440 )     4,501  
                 

Total comprehensive loss

  $ (257 )   $ (7,789 )

 

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements 

 

5

 

Concrete Pumping Holdings, Inc.

Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

 

 

  Common Stock           Additional Paid-In Capital     Treasury Stock     Accumulated Other Comprehensive Income (loss)     Accumulated Deficit     Total  

(in thousands)

  Shares     Amount                                

Balance at October 31, 2020

    56,463,992     $ 6     $ 367,681     $ (131 )   $ (606 )   $ (99,840 )   $ 267,110  

Stock-based compensation expense

    -       -       672       -       -       -       672  

Shares issued under stock-based program, net of treasury shares purchased for tax withholding

    6,707       -       -       (330 )     -       -       (330 )

Net loss

    -       -       -       -       -       (12,290 )     (12,290 )

Foreign currency translation adjustment

    -       -       -       -       4,501       -       4,501  

Balance at January 31, 2021

    56,470,699     $ 6     $ 368,353     $ (461 )   $ 3,895     $ (112,130 )   $ 259,663  

 

 

   

Common Stock

   

Additional
Paid-In
Capital

   

Treasury Stock

   

Accumulated
Other
Comprehensive
Income (loss)

   

Accumulated Deficit

   

Total

 

(in thousands)

 

Shares

   

Amount

                                         

Balance at October 31, 2021

    56,564,642     $ 6     $ 374,272     $ (461 )   $ 3,671     $ (114,913 )   $ 262,575  

Stock-based compensation expense

    -       -       1,480       -       -       -       1,480  
Shares issued under stock-based program, net of treasury shares purchased for tax withholding     135,506       -       2       (534 )     -       -       (532 )

Net income

    -       -       -       -       -       1,183       1,183  

Foreign currency translation adjustment

    -       -       -       -       (1,440 )     -       (1,440 )

Balance at January 31, 2022

    56,700,148     $ 6     $ 375,754     $ (995 )   $ 2,231     $ (113,730 )   $ 263,266  

 

 

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements

 

6

 

Concrete Pumping Holdings, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

   

For the Three Months Ended January 31,

 

(in thousands)

 

2022

   

2021

 

Net income (loss)

  $ 1,183     $ (12,290 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

               

Depreciation

    8,341       6,925  

Deferred income taxes

    (175 )     (2,855 )

Amortization of deferred financing costs

    458       961  

Amortization of intangible assets

    5,739       6,913  

Stock-based compensation expense

    1,480       672  

Change in fair value of warrant liabilities

    -       -  

Loss on extinguishment of debt

    -       15,510  

Net gain on the sale of property, plant and equipment

    (444 )     (593 )

Net changes in operating assets and liabilities:

               

Trade receivables, net

    676       5,656  

Inventory

    (265 )     (10 )

Prepaid expenses and other current assets

    (6,232 )     (4,287 )

Income taxes payable, net

    80       (512 )

Accounts payable

    (3,460 )     (1,157 )

Accrued payroll, accrued expenses and other current liabilities

    5,807       (2,353 )

Net cash provided by operating activities

    13,188       12,580  
                 

Cash flows from investing activities:

               

Purchases of property, plant and equipment

    (35,431 )     (9,434 )

Proceeds from sale of property, plant and equipment

    1,950       1,894  

Purchases of intangible assets

    (1,050 )     -  

Net cash used in investing activities

    (34,531 )     (7,540 )
                 

Cash flows from financing activities:

               

Proceeds on long term debt

    -       375,000  

Payments on long term debt

    -       (381,206 )

Proceeds on revolving loan

    92,164       80,945  

Payments on revolving loan

    (76,928 )     (75,122 )

Payment of debt issuance costs

    -       (8,464 )

Payments on capital lease obligations

    (25 )     (23 )

Purchase of treasury stock

    (534 )     (330 )

Net cash provided by (used in) financing activities

    14,677       (9,200 )

Effect of foreign currency exchange rate on cash

    155       (304 )

Net decrease in cash and cash equivalents

    (6,511 )     (4,463 )

Cash and cash equivalents:

               

Beginning of period

    9,298       6,736  

End of period

  $ 2,787     $ 2,273  

 

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements

 

7

 

Concrete Pumping Holdings, Inc.

Consolidated Statements of Cash Flows (Continued)

(Unaudited)

 

   

Three Months Ended January 31,

 

(in thousands)

 

2022

   

2021

 

Supplemental cash flow information:

               

Cash paid for interest

  $ 118     $ 5,890  

Cash paid for income taxes

  $ 50     $ 614  
                 

Non-cash investing and financing activities:

               

Equipment purchases included in accrued expenses and accounts payable

  $ 2,326     $ 781  

 

 

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements

 

8

 

Note 1. Organization and Description of Business

 

Organization

 

Concrete Pumping Holdings, Inc. (the “Company”) is a Delaware corporation headquartered in 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”).

 

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 these companies do not contract to purchase, mix, or deliver concrete. Brundage-Bone and Capital collectively have approximately 95 branch locations across 19 states, with its corporate headquarters in Denver, Colorado. Camfaud has approximately 30 branch locations throughout the U.K., with its corporate headquarters in Epping (near London), England.

 

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 17 operating locations across the U.S. with its corporate headquarters in Denver, Colorado. In addition, we have concrete waste management operations under our Eco-Pan brand name in the U.K. and currently operate from a shared Camfaud location.

 

Seasonality

 

The Company’s sales are historically seasonal, with lower revenue in the first quarter and higher revenue in the fourth quarter of each year. Such seasonality also causes the Company’s working capital cash flow requirements to vary from quarter to quarter 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. As of the first quarter of fiscal 2022, revenue volumes have largely recovered in a number of our markets; however, the lingering impact from COVID-19 remains an issue for qulified labor resources in certain markets.

 

Despite recent progress in the administration of vaccines, both the outbreak, and impact from various variants, including Delta and Omicron 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. To date, the COVID-19 pandemic has negatively impacted revenue volumes primarily 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 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 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.

 

9

 

No impairments were identified through January 31, 2022. The Company will continue to evaluate its 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.

 

 

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, 2022 and for all periods presented.

 

Principles of consolidation

 

The Consolidated Financial Statements include all amounts 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 U.S. 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 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 $0.7 million as of January 31, 2022 and October 31, 2021. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received.

 

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, no allowance for obsolete and slow-moving inventory was required as of  January 31, 2022 and October 31, 2021.

 

10

 

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. Amortization of debt issuance costs are recorded in interest expense

Goodwill

In accordance with Accounting Standards Codification ("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, 2022, 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

  15 to 40 

Capital lease assets—buildings

  40 

Furniture and office equipment

  2 to 7 

Machinery and equipment

  3 to 25 

Transportation equipment

  3 to 7 

 

Capital lease assets are amortized over the estimated useful life of the asset.
 
11

 

Intangible assets

 

Intangible assets are recorded at cost or their estimated fair value (when acquired through a business combination or asset acquisition) 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. No indicators of impairment were identified as of January 31, 2022.

 

Derivatives

 

The Company has public warrants outstanding and due to certain provisions in the warrant agreement, coupled with the Company's capital structure, which includes preferred stock with voting rights, the public warrants do not meet the criteria to be classified in stockholders’ equity and instead meet the definition of a liability-classified derivative under ASC Topic 815, Derivatives and Hedging ("ASC 815"). As such, the Company recognizes these warrants within long-term liabilities on the consolidated balance sheet at fair value, with subsequent changes in fair value recognized in the consolidated statements of operations at each reporting date.

 

Revenue recognition

 

The Company adopted ASC 606, Revenue Recognition ("ASC 606") on October 31, 2021, effective as of November 1, 2020, using the modified retrospective method. Results for reporting periods beginning October 31, 2021 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our legacy accounting under ASC 605: Revenue Recognition ("ASC 605"). The adoption of the guidance did not have a material impact on the amount or timing of revenue recognized.

 

The Company generates revenues primarily from (1) concrete pumping services in both the U.S. and U.K and (2) the Company’s concrete waste services business, both of which are discussed below. In addition, the Company generates an immaterial amount of revenue from the sales of replacement parts to customers. The Company’s delivery terms for replacement part sales are FOB shipping point.

 

Concrete Pumping Services

 

The vast majority of all revenue from concrete pumping services comes from the Company's daily service, where the Company sends a single operator with a conventional concrete pump truck (an articulating boom attached to a large truck) to deliver concrete (or other construction material such as aggregate) from one point to another as directed by the customer. Customers are billed on either (1) a solely time basis or (2) a time and volume pumped basis. Additional charges (such as a fuel surcharge and travel costs) are frequently added based on specific project requirements. The Company's performance obligations related to these jobs are satisfied daily and invoiced accordingly and as such, there are no unsatisfied performance obligations at the end of any day.

 

12

 

A much smaller component of the total concrete pumping services revenue comes from placing boom services. Placing booms have become an essential tool in the efficient construction of high-rise buildings. A placing boom is the articulating boom component of a conventional concrete pump truck, positioned on the uppermost floor of a building construction project. Concrete is then supplied through a pipeline from the pump that remains at ground level. Due to the long term nature of high-rise jobs, these contracts are generally longer term but typically not in excess of one year. Customers are generally invoiced (1) at month end for a fixed monthly placing boom usage fee, (2) daily for time worked and volume of concrete pumped and (3) at the beginning of the job for certain set-up costs and at the end of the job for tear-down costs. As it pertains to the fixed monthly usage fee and daily fees related to time worked and volume of concrete pumped, which collectively make up a significant portion of the total consideration in the contract, the Company recognizes revenue as invoiced in accordance with ASC 606. For the consideration allocated to set-up and tear-down fees, the Company recognizes revenue on a straight-line basis over the estimated term of the contract. The aggregate asset or liability from these services is not significant. As invoices are issued with terms of net 30 and substantially all of the contracts are completed within a year, we do not disclose the value of unsatisfied performance obligations, which would include the value of future usage of the Company’s placing boom asset, hours to be worked or cubic yards to be pumped.

 

Concrete Waste Services

 

The Company’s concrete waste services business consists of service fees charged to customers for the delivery and usage over time of its pans or containers and the disposal of the concrete waste material. For these services, the Company has identified two performance obligations: (1) the daily usage of the pans or containers and (2) the pickup and disposal of the waste material. The fees allocable to these obligations are based on their standalone selling prices based on observable prices and expected cost plus margin approach. The Company recognizes revenue monthly for the daily usage fees and recognizes the revenue attributable to the disposal services when the disposal is completed. The aggregate asset or liability from these services is not significant. As invoices are issued with terms of net 30 and substantially all of the contracts are completed within a year, we do not disclose the value of unsatisfied performance obligations, which would include the remaining days the pans will be utilized or the future pickup and disposal of the waste material.

 

Practical Expedients Applied

 

The Company collects sales taxes when required from customers as part of the purchase price, which are then subsequently remitted to the appropriate authorities. The Company has elected to apply the practical expedient provided by ASC 606, which allows entities to make an accounting policy election to exclude sales taxes and other similar taxes from the measurement.

 

At contract inception, the Company does not expect the period between customer payment and transfer of control of the promised services to the customer to exceed one year as customers are invoiced with terms of 30 days. As such, the Company has used the practical expedient in ASC 606 which states that no adjustment for a significant financing component is necessary.

 

In addition, the Company incurs limited costs in order to obtain contracts. However, as the amortization period for these assets would be one year or less, the Company has elected the practical expedient permitted by ASC 606 and recognized those incremental costs of obtaining a contract as an expense when incurred. Upon transition to the new the standard, the Company did not restate contracts that begin and are completed within the same annual reporting period. As discussed above, contracts of the Company are typically completed within the year.

 

Disaggregation of Revenue

 

Revenue disaggregated by reportable segment and geographic area where the work was performed for the periods ended January 31, 2022 and  October 31, 2021 is presented in Note 17.

 

Stock-based compensation

 

The Company follows ASC 718, CompensationStock 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 fair value of time-based only restricted stock awards and time-based only stock options with a $.01 exercise price are valued at the closing price of the Company's stock as of the date of the grant of these awards. 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. For stock awards that include a market-based vesting condition, such as the trading price of the Company’s common stock exceeding certain price targets, the Company uses a Monte Carlo Simulation in estimating the fair value at grant date and recognizes compensation expense over the implied service period (median time to vest). Shares exercised are issued out of authorized but not outstanding shares. The Company accounts for forfeitures as they occur.

 

13

 

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. The Company recognizes interest and penalties related to underpayment of income taxes in general and administrative expense in the consolidated statements of operations.

 

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 is the only component of accumulated 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. For purposes of ASC 260, the two-class method is computed based on the following participating stock: (1) Common Stock and (2) Restricted Stock Awards.

 

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 and asset acquisitions

 

The Company applies the principles provided in ASC 805, Business Combinations ("ASC 805"), to determine whether a transaction involves an asset or a business.

 

If it is determined an acquisition is a business combination, 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.

 

If it is determined an acquisition is an asset acquisition, the purchase consideration (which will include certain transaction costs) is allocated to the acquired assets and liabilities based on their relative fair values.

 

14

 

Concentrations

 

As of  January 31, 2022 and  October 31, 2021 there were three primary 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

 

ASU 2016-02, Leases (“ASU 2016-02”) - In February 2016, the FASB issued 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 guidance during the fourth quarter of the fiscal 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. 

 

ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) (“ASU 2016-13”)- In June 2016, the FASB issued ASU No. 2016-13, which, 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 guidance during the fourth quarter of the fiscal 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.

 

15

 

ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) - In March 2020, the FASB issued 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 consolidated financial statements as well as timing of adoption.

 

 

Note 4. Business Combinations and Asset Acquisitions

 

The Company completed one acquisition during the first quarter of fiscal 2022 and three acquisitions in fiscal 2021, all of which qualified as asset acquisitions. Except for the acquisition of Pioneer and Hi-Tech, these acquisitions are not significant to our results of operations. The consideration for the acquisitions in both fiscal 2022 and fiscal 2021 consisted of cash and was allocated to identified long-lived tangible and intangible assets.

 

November 2022 Pioneer Acquisition

 

In November 2021, the Company acquired the assets of Pioneer Concrete Pumping Services (“Pioneer”) for total purchase consideration of $20.2 million. This transaction was treated as an asset acquisition. The Company allocated $19.1 million to the purchase of Pioneer's equipment. The remaining $1.1 million was allocated to definite lived assembled workforce and customer relationships intangible assets. All assets were valued using level 3 inputs. The equipment was valued using a market approach while the intangible assets were valued using an income approach based on management’s projections. The intangible assets will be amortized over 3 to 5 years.

 

September 2021 Hi-Tech Acquisition

 

In September 2021, the Company acquired the assets of Hi-Tech Concrete Pumping Services (“Hi-Tech”) for total purchase consideration of $12.3 million. This transaction was treated as an asset acquisition. The Company allocated $11.5 million to the purchase of Hi-Tech's equipment. The remaining $0.8 million was allocated to definite lived assembled workforce and customer relationships intangible assets. All assets were valued using level 3 inputs. The equipment was valued using a market approach while the intangible assets were valued using an income approach based on management’s projections. The intangible assets will be amortized over 3 to 5 years.

 

 

Note 5. 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 as recorded due to the short-term maturity of these instruments, which approximates fair value. 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.

 

Long-term debt instruments
 
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, 2022 and at  October 31, 2021 is presented in the table below based on the prevailing interest rates and trading activity of the Senior Notes.
 
  

January 31,

  

October 31,

 
  

2022

  

2021

 

(in thousands)

 

Carrying Value

  

Fair Value

  

Carrying Value

  

Fair Value

 

Senior notes

 $375,000  $375,000  $375,000  $390,938 

Capital lease obligations

 $355  $355  $381  $381 

 

16

 

Warrants

At both January 31, 2022 and  October 31, 2021, there were 13,017,677 public warrants and no private warrants outstanding. Each warrant entitles its holder to purchase one share of Class A common stock at an exercise price of $11.50 per share. The warrants expire on December 6, 2023, or earlier upon redemption or liquidation. The Company may call the outstanding public warrants for redemption at a price of $0.01 per warrant, if the last sale price of the Company’s common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third business day before the Company sends the notice of redemption to the warrant holders.

The Company accounts for the public warrants issued in connection with its IPO in accordance with ASC 815, under which certain provisions in the public warrant agreements do not meet the criteria for equity classification and therefore these warrants must be recorded as liabilities.  The fair value of each public warrant is based on the public trading price of the warrant (Level 1 fair value measurement). Gains and losses related to the warrants are reflected in the change in fair value of warrant liabilities in the consolidated statements of operations.

All other non-financial assets

 

The Company's non-financial assets, which primarily consist of property and equipment, goodwill and other intangible assets, are not 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 6. Prepaid Expenses and Other Current Assets

 

The significant components of prepaid expenses and other current assets at  January 31, 2022 and at  October 31, 2021 are comprised of the following:

 

  

January 31,

  

October 31,

 

(in thousands)

 

2022

  

2021

 

Prepaid insurance

 $5,718  $949 

Prepaid licenses and deposits

  1,118   360 

Prepaid rent

  544   331 

Other current assets and prepaids

  3,040   2,470 

Total prepaid expenses and other current assets

 $10,420  $4,110 
 

Note 7. Property, Plant and Equipment

 

The significant components of property, plant and equipment at  January 31, 2022 and at  October 31, 2021 are comprised of the following:

 

  

January 31,

  

October 31,

 

(in thousands)

 

2022

  

2021

 

Land, building and improvements

 $27,082  $27,062 

Capital leases—land and buildings

  828   828 

Machinery and equipment

  400,143   374,034 

Transportation equipment

  3,945   2,935 

Furniture and office equipment

  3,018   2,880 

Property, plant and equipment, gross

  435,016   407,739 

Less accumulated depreciation

  (77,345)  (69,968)

Property, plant and equipment, net

 $357,671  $337,771 

 

Depreciation expense for the three-month periods ended January 31, 2022 and 2021 was $8.3 million and $6.9 million, respectively. Depreciation expense related to revenue producing machinery and equipment is recorded in cost of operations and an immaterial amount of depreciation expense related to the Company's capital leases and furniture and fixtures is included in general and administrative expenses in the consolidated statements of operations.

 

 

17

 

Note 8. Goodwill and Intangible Assets

 

The Company has recognized goodwill and certain intangible assets in connection with prior business combinations.

 

There were no triggering events during the three-month period ended January 31, 2022. 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, 2022 and at  October 31, 2021:

 

  

January 31,

  

October 31,

 
  

2022

  

2021

 
  

Gross

          

Foreign Currency

  

Net

  

Gross

          

Foreign Currency

  

Net

 
  

Carrying

      

Accumulated

  

Translation

  

Carrying

  

Carrying

      

Accumulated

  

Translation

  Carrying 

(in thousands)

 

Value

  

Impairment

  

Amortization

  

Adjustment

  

Amount

  

Value

  

Impairment

  

Amortization

  

Adjustment

  

Amount

 

Customer relationship

 $195,015  $-  $(96,657) $(338) $98,020  $195,220  $-  $(91,169) $(539) $103,512 

Trade name

  5,644   -   (1,739)  (41)  3,864   5,748   -   (1,598)  (71)  4,079 

Trade name (indefinite life)

  55,500   (5,000)  -   -   50,500   55,500   (5,000)  -   -   50,500 

Assembled workforce

  1,200   -   (100)  -   1,100   350   -   -   -   350 

Noncompete agreements

  200   -   (112)  -   88   200   -   (102)  -   98 

Total intangibles

 $257,559  $(5,000) $(98,608) $(379) $153,572  $257,018  $(5,000) $(92,869) $(610) $158,539 

 

Amortization expense for the three-month periods ended January 31, 2022 and 2021 was $5.7 million and $6.9 million, respectively. The estimated aggregate amortization expense for intangible assets over the next five fiscal years ending October 31 and thereafter is as follows:

 

(in thousands)

    

2022 (excluding the period from November 1, 2021 to January 31, 2022)

 $16,711 

2023

  17,831 

2024

  14,344 

2025

  11,304 

2026

  9,249 

Thereafter

  33,633 

Total

 $103,072 

 

The changes in the carrying value of goodwill by reportable segment for the three-month periods ended January 31, 2022 and 2021 are as follows:

 

(in thousands)

 

U.S. Concrete Pumping

  

U.K. Operations

  

U.S. Concrete Waste Management Services

  

Total

 

Balance at October 31, 2020

 $147,482  $26,539  $49,133  $223,154 

Foreign currency translation

  -   1,622   -   1,622 

Balance at January 31, 2021

 $147,482  $28,161  $49,133  $224,776 
                 

Balance at October 31, 2021

 $147,482  $28,085  $49,133  $224,700 

Foreign currency translation

  -   (507)  -  $(507)

Balance at January 31, 2022

 $147,482  $27,578  $49,133  $224,193 

 

18

 

Note 9. 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 $375.0 million in aggregate principal amount of its 6.000% senior secured second lien notes due 2026 (the “Senior Notes”) issued pursuant to an indenture, among the Issuer, the Company, the other Guarantors (as defined below), Deutsche Bank Trust Company Americas, as trustee and as collateral agent (the "Indenture") and (ii) entered into an amended and restated ABL Facility (the "ABL Facility") by and 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, which provided up to $125.0 million of asset-based revolving loan commitments to the Company and the other borrowers under the ABL Facility. The proceeds from the Senior Notes, along with certain borrowings under the ABL Facility, were used to repay all outstanding indebtedness under the Company’s then existing Term Loan Agreement (see discussion below), dated December 6, 2018, and pay related fees and expenses. Summarized terms of these facilities are included below.

 

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 is a borrower or a guarantor 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 the Senior Notes as of  January 31, 2022 was $375.0 million and as of that date, the Company was in compliance with all covenants under the Indenture.

 

19

 

ABL Facility

 

Summarized terms of the ABL Facility, as amended, are as follows:

 

 Borrowing availability in U.S. Dollars and GBP up to a maximum aggregate principal amount of $125.0 million and an accordion feature under which the Company can increase the ABL Facility by up to an additional $75.0 million;
 Borrowing capacity available for standby letters of credit of up to $7.5 million and for swing loan borrowings of up to $7.5 million. Any issuance of letters of credit or making of a swing loan will reduce the amount available under the ABL Facility;
 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;
 Borrowings in U.S. Dollars and GBP (through September 30, 2021 for GBP borrowings) 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. After September 30, 2021, borrowings in GBP bear interest at the SONIA rate plus an applicable margin currently set at 2.0326%. The ABL Facility is subject to a step down of 0.25% based on excess availability levels;
 The unused line fee percentage is 25 basis points if the quarterly average amount drawn is greater than 50% of the borrowing availability; 50 basis points if the quarterly average amount drawn is less than 50% of borrowing availability;
 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;
 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.

 

20

 

The outstanding balance under the ABL Facility as of  January 31, 2022 was $16.2 million and as of that date, the Company was in compliance with all debt covenants.

 

As of January 31, 2022, we had $105.2 million of available borrowing capacity under the ABL Facility.

 

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 Closing Date, 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 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 $15.5 million in debt extinguishment costs related to the write-off of all unamortized deferred debt issuance costs that were related to the term loan and capitalized $7.0 million of debt issuance costs related to the Senior Notes. For the amendments to the ABL Facility, the Company capitalized $1.5 million of debt issuance costs.

 

The table below is a summary of the composition of the Company’s debt balances at  January 31, 2022 and at October 31, 2021.

 

  

January 31,

  

October 31,

 

(in thousands)

 

2022

  

2021

 

Revolving loan (short term)

 $16,208  $990 

Senior notes - all long term

  375,000   375,000 

Total debt, gross

  391,208   375,990 

Less unamortized deferred financing costs offsetting long term debt

  (5,568)  (5,916)

Total debt, net of unamortized deferred financing costs

 $385,640  $

370,074

 

 

Note 10. Accrued Payroll and Payroll Expenses

 

The following table summarizes accrued payroll and expenses at  January 31, 2022 and at  October 31, 2021:

 

  

January 31,

  

October 31,

 

(in thousands)

 

2022

  

2021

 

Accrued vacation

 $2,099  $1,967 

Accrued payroll

  2,240   1,727 

Accrued bonus

  1,369   3,593 

Accrued employee-related taxes

  2,729   4,606 

Other accrued

  331   333 

Total accrued payroll and payroll expenses

 $8,768  $12,226 

 

21

 

 

Note 11. Accrued Expenses and Other Current Liabilities

 

The following table summarizes accrued expenses and other current liabilities at  January 31, 2022 and at  October 31, 2021

 

  

January 31,

  

October 31,

 

(in thousands)

 

2022

  

2021

 

Accrued insurance

 $7,016  $7,473 

Accrued interest

  11,307   5,627 

Accrued equipment purchases

  2,603   4,955 

Accrued sales and use tax

  715   690 

Accrued property taxes

  500   917 

Accrued professional fees

  1,143   1,134 

Other

  4,810   3,144 

Total accrued expenses and other liabilities

 $28,094  $23,940 
 

Note 12. Income Taxes 

 

For the first fiscal quarter ended January 31, 2022, the Company recorded an income tax benefit of $0.0 million on pretax income of $1.2 million. For the same quarter a year ago, the Company recorded income tax benefit of $2.6 million on a pretax loss of $14.9 million. The effective tax rate for the three-month period ended January 31, 2022 was impacted by (1) the excess tax benefit from vestings and exercises of stock-based awards of $0.1 million and (2) a change in unremitted earnings deferred tax liability due to foreign rate fluctuations of $0.2 million.

 

At  January 31, 2022 and October 31, 2021, the Company had deferred tax liabilities, net of deferred tax assets, of $70.2 million and $70.6 million, respectively. Included in deferred tax assets at January 31, 2022 and October 31, 2021 were net operating loss carryforwards of $17.8 million. The Company has a valuation allowance of $0.1 million as of both  January 31, 2022 and  October 31, 2021 related to foreign tax credit carryforwards where realization is more uncertain at this time due to the limited carryforward periods that exist.

 

Note 13. Commitments and Contingencies

 

Insurance

 

As of  January 31, 2022 and October 31, 2021, the Company was partially insured for automobile, general and worker's compensation liability. The Company has accrued $5.2 million and $4.5 million, as of  January 31, 2022 and October 31, 2021, respectively, for claims incurred but not reported and estimated losses reported, which is included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets.

 

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, 2022 and October 31, 2021, the Company had accrued $1.8 million and $1.6 million, respectively, for health claims incurred but not reported based on historical claims amounts and average lag time. These accruals are included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets. The Company contracts with a third party administrator to process claims, remit benefits, etc.

 

22

 

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 $7.5 million of standby letters of credit. As of  January 31, 2022, total outstanding letters of credit totaled $3.0 million, the vast majority of which had been committed to the Company’s general liability insurance provider.

 

 

Note 14. Stockholders Equity

 

The Company’s amended and restated certificate of incorporation authorizes the issuance of 500,000,000 shares of common stock, par value $0.0001, and 10,000,000 shares of preferred stock, par value $0.0001. Immediately following December 6, 2018, there were:

 

 

28,847,707 shares of common stock issued and outstanding;

 

34,100,000 warrants outstanding, each exercisable for one share of common stock at an exercise price of $11.50 per share; and

 

2,450,980 shares of zero-dividend convertible perpetual preferred stock (“Series A Preferred Stock”) outstanding, as further discussed below

 

Grants of new restricted stock awards and exercises of stock options are issued out of outstanding and available common stock.

 

As discussed below, on April 29, 2019, 2,101,213 shares of common stock were issued in exchange for the Company's public warrants and 1,707,175 shares of common stock were issued in exchange for the Company's private warrants. After the completion of the warrant exchange and as of January 31, 2022, there were 13,017,677 public warrants outstanding.

 

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 18,098,166 of its common stock at a price of $4.50 per share, receiving net proceeds of approximately $77.4 million, after deducting underwriting discounts, commissions, and other offering expenses. In connection with the offering, certain of the Company’s directors, officers and significant stockholders, and certain other related investors purchased an aggregate of 3,980,166 shares of its common stock from the underwriters at the public offering price of $4.50, representing approximately 25% of the total shares issued (without giving effect to the underwriters’ option to purchase additional shares).

 

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 1:1 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 ($25,000,000) plus an additional cumulative amount that will accrue at an annual rate of 7.0% thereon. As of  January 31, 2022, the additional cumulative amount totaled $5.7 million which would be recognized when redemption is probable. The Series A Preferred Stock will rank senior in priority and will have a senior liquidation preference to the Common Stock. In addition, if the volume weighted average price of shares of the Company’s common stock equals or exceeds $13.00 for 30 consecutive days, then the Company will have the right to require the holder of the Series A Preferred Stock to convert its Series A Preferred Stock into Company common stock, at a ratio of 1:1 (subject to customary adjustments such as adjustments for anti-dilution events for instance stock splits or reverse stock split).

 

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.

 

 

 

23

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 0.2105 shares of common stock in exchange for each outstanding public warrant tendered and 0.1538 shares of common stock in exchange for each private warrant tendered pursuant to the offer (the “Offer” or “Warrant Exchange”).

On April 26, 2019, a total of 9,982,123 public warrants and 11,100,000 private warrants were tendered for exchange pursuant to the Offer.  On April 29, 2019, 2,101,213 shares of common stock were issued in exchange for the tendered public warrants and 1,707,175 shares of common stock were issued in exchange for the tendered private warrants. A negligible amount of cash was paid for fractional shares. The fair value of common stock issued in exchange for the warrants, totaling $26.3 million, was recognized in additional paid in capital.

 

Note 15. Stock-Based Compensation

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 $0.01. Regardless of where the awards were granted, the awards generally vest pursuant to one of the following four conditions:

 

(1)

Time-based only – Awards vest in equal installments over a specified 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 the unvested awards outstanding at January 31, 2022, including the location, type of award, shares outstanding, unrecognized compensation expense, and the date that expense will be recognized through. The total stock compensation expense recognized for restricted stock awards for the three-month periods ended January 31, 2022 and 2021 was $1.3 million and $0.6 million, respectively. The total stock compensation expense recognized for stock options for the three-month periods ended January 31, 2022 and 2021 was $0.2 million and $0.1 million, respectively. 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.

 

During the first quarter of fiscal 2022, the Company granted 69,491 stock awards that have a market-based vesting condition. The assumptions used in the Monte Carlo Simulation for these grants were stock price on date of grant, a price target expiration date of December 6, 2023, expected volatility of 73% and a risk-free interest rate of 0.5%.

 

24

 

Location

 

Type of Award

 

Shares Unvested at

January 31, 2022

  

Weighted

Average Fair

Value

  

Unrecognized

Compensation

Expense at

January 31, 2022

 

Date Expense

will be

Recognized

Through

(Straight-Line Basis)

  

U.S.

 

Time Based Only

  655,646  $5.98  $3,347,782 

12/6/2023

  

U.S.

 

$6 Market/Time- Based

  150,697  $3.86  $- 

10/29/2020

  

U.S.

 

$6 Market/Time- Based

  191,902  $8.65  $104,425 

3/29/2022

* 

U.S.

 

$6 Market/Time- Based

  191,902  $8.65  $518,030 

3/29/2023

* 

U.S.

 

$6 Market/Time- Based

  191,913  $8.65  $747,066 

3/29/2024

* 

U.S.

 

$8 Market/Time- Based

  150,697  $3.46  $- 

10/29/2020

  

U.S.

 

$8 Market/Time- Based

  191,903  $7.45  $291,941 

8/23/2022

** 

U.S.

 

$8 Market/Time- Based

  191,903  $7.45  $552,343 

8/23/2023

** 

U.S.

 

$8 Market/Time- Based

  191,912  $7.45  $710,583 

8/23/2024

** 

U.S.

 

$10 Market/Time- Based

  150,706  $3.15  $- 

10/29/2020

  

U.S.

 

$10 Market/Time- Based

  191,471  $6.46  $378,258 

7/9/2023

  

U.S.

 

$10 Market/Time- Based

  191,467  $6.46  $543,516 

7/9/2024

  

U.S.

 

$10 Market/Time- Based

  191,482  $6.46  $657,257 

7/9/2025

  

U.S.

 

$13 Market/Time- Based

  433  $4.47  $161 

5/4/2022

  

U.S.

 

$13 Market/Time- Based

  433  $4.47  $597 

5/4/2023

  

U.S.

 

$13 Market/Time- Based

  434  $4.47  $864 

5/4/2024

  

U.S.

 

$16 Market/Time- Based

  433  $3.85  $281 

8/27/2022

  

U.S.

 

$16 Market/Time- Based

  433  $3.85  $597 

8/27/2023

  

U.S.

 

$16 Market/Time- Based

  434  $3.85  $798 

8/27/2024

  

U.S.

 

$19 Market/Time- Based

  433  $3.34  $320 

11/19/2022

  

U.S.

 

$19 Market/Time- Based

  433  $3.34  $563 

11/19/2023

  

U.S.

 

$19 Market/Time- Based

  434  $3.34  $722 

11/19/2024

  

U.S.

 

$10 Market/Time- Based

  4,635  $7.28  $23,564 

1/31/2023

  

U.S.

 

$10 Market/Time- Based

  4,635  $7.28  $27,744 

1/31/2024

  

U.S.

 

$10 Market/Time- Based

  4,634  $7.28  $29,485 

1/31/2025

  

U.S.

 

$10 Market/Time- Based

  22,408  $6.83  $137,796 

6/30/2023

  

U.S.

 

$10 Market/Time- Based

  22,415  $6.83  $143,791 

6/30/2024

  

U.S.

 

$10 Market/Time- Based

  22,418  $6.83  $146,417 

6/30/2025

  

U.K.

 

Time Based Only

  90,431  $5.75  $408,123 

12/6/2023

  

U.K.

 

$6 Market/Time- Based

  28,885  $3.85  $- 

10/29/2020

  

U.K.

 

$6 Market/Time- Based

  27,892  $8.36  $15,007 

3/29/2022

* 

U.K.

 

$6 Market/Time- Based

  27,892  $8.36  $73,847 

3/29/2023

* 

U.K.

 

$6 Market/Time- Based

  27,901  $8.36  $106,167 

3/29/2024

* 

U.K.

 

$8 Market/Time- Based

  28,885  $3.45  $- 

10/29/2020

  

U.K.

 

$8 Market/Time- Based

  27,892  $

7.20

  $41,784 

8/23/2022

** 

U.K.

 

$8 Market/Time- Based

  27,892  $7.20  $78,591 

8/23/2023

** 

U.K.

 

$8 Market/Time- Based

  27,901  $7.20  $100,863 

8/23/2024

** 

U.K.

 

$10 Market/Time- Based

  28,886  $3.14  $- 

10/29/2020

  

U.K.

 

$10 Market/Time- Based

  27,902  $6.24  $54,060 

7/9/2023

  

U.K.

 

$10 Market/Time- Based

  27,892  $6.24  $77,256 

7/9/2024

  

U.K.

 

$10 Market/Time- Based

  27,901  $6.24  $93,232 

7/9/2025

  

U.K.

 

$10 Market/Time- Based

  750  $6.83  $4,612 

6/30/2023

  

U.K.

 

$10 Market/Time- Based

  750  $6.83  $4,811 

6/30/2024

  

U.K.

 

$10 Market/Time- Based

  750  $6.83  $4,898 

6/30/2025

  

Total

  3,349,048      $9,428,151    

 

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.

 

*The $6.00 market condition price target was achieved on March 29, 2021, and on such date, the remaining unrecognized expense for these awards will be accelerated over the new requisite service period.
**The $8.00 market condition price target was achieved on August 23, 2021, and on such date, the remaining unrecognized expense for these awards will be accelerated over the new requisite service period.

 

25
 

 

Note 16. 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, 2022, the Company had outstanding (1) 13.0 million warrants to purchase shares of common stock at an exercise price of $11.50, (2) 2.9 million outstanding unvested restricted stock awards, (3) 1.2 million outstanding unexercised incentive stock options, (4) 0.4 million outstanding unexercised non-qualified stock options, and (52.5 million shares of Series A Preferred Stock, all of which could potentially be dilutive. The dilutive effects of the 2.5 million shares of preferred stock and 13.0 million warrants were excluded from the calculation of diluted net income per share for the three-month periods ended January 31, 2022 and 2021, as their impact would have been anti-dilutive. For the three-month period ending January 31, 2021, the Company realized a net loss and as such, the weighted-average dilutive impact of any shares was excluded from the calculation of diluted EPS because they were antidilutive.

 

The table below shows our basic and diluted EPS calculations for the three-month periods ended January 31, 2022 and 2021:

 

  

Three Months Ended January 31,

 

(in thousands, except share and per share amounts)

 

2022

  

2021

 

Net income (loss) (numerator):

        

Net income (loss) attributable to Concrete Pumping Holdings, Inc.

 $1,183  $(12,290)

Less: Accretion of liquidation preference on preferred stock

  (441)  (507)

Less: Undistributed earnings allocated to participating securities

  (40)  - 

Net income (loss) attributable to common stockholders (numerator for basic earnings per share)

 $702  $(12,797)

Add back: Undistributed earning allocated to participating securities

  40   - 

Less: Undistributed earnings reallocated to participating securities

  (39)  - 

Numerator for diluted earnings (loss) per share

 $