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 |
For the transition period from ____ to ____
Commission File Number:
CONCRETE PUMPING HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | |
| | |
| (Address of principal executive offices) | (Zip Code) |
(
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed 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 |
| | | |
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 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 | ☐ | | ☒ |
| 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
As of September 1, 2023, the registrant had
CONCRETE PUMPING HOLDINGS, INC.
FORM 10-Q
FOR THE QUARTER ENDED July 31, 2023
|
|
Page |
||
| Part I. Financial Information |
|
||
|
|
|
||
| Item 1. |
|
||
|
|
|||
|
|
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) |
||
|
|
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) |
6 | |
|
|
8 | ||
|
|
Notes to Unaudited Condensed Consolidated Financial Statements |
||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
||
| Item 3. |
|||
| Item 4. |
|||
|
|
|
|
|
| Part II. Other Information |
|
||
|
|
|
|
|
| Item 1. |
37 | ||
| Item 1A. |
37 | ||
| Item 2. |
37 | ||
| Item 3. |
37 | ||
| Item 4. |
37 | ||
| Item 5. |
37 | ||
| Item 6. |
38 | ||
|
|
|
|
|
| Signatures | 39 | ||
PART I
Concrete Pumping Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| As of July 31, | As of October 31, | |||||||
| (in thousands except per share amounts) | 2023 | 2022 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Trade receivables, net of allowance for doubtful accounts of $ and $, respectively | ||||||||
| Inventory, net | ||||||||
| Income taxes receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Right-of-use operating lease assets | ||||||||
| Other non-current assets | ||||||||
| Deferred financing costs | ||||||||
| Total assets | $ | $ | ||||||
| Current liabilities: | ||||||||
| Revolving loan | $ | $ | ||||||
| Operating lease obligations, current portion | ||||||||
| Finance lease obligations, current portion | ||||||||
| Accounts payable | ||||||||
| Accrued payroll and payroll expenses | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Income taxes payable | ||||||||
| Warrant liability, current portion | ||||||||
| Total current liabilities | ||||||||
| Long term debt, net of discount for deferred financing costs | ||||||||
| Operating lease obligations, non-current | ||||||||
| Finance lease obligations, non-current | ||||||||
| Deferred income taxes | ||||||||
| Other liabilities, non-current | ||||||||
| Warrant liability, non-current | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 13) | ||||||||
| Zero-dividend convertible perpetual preferred stock, $ par value, shares issued and outstanding as of July 31, 2023 and October 31, 2022 | ||||||||
| Stockholders' equity | ||||||||
| Common stock, $ par value, shares authorized, and issued and outstanding as of July 31, 2023 and October 31, 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Concrete Pumping Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended July 31, |
Nine Months Ended July 31, |
|||||||||||||||
| (in thousands, except share and per share amounts) |
2023 |
2022 |
2023 |
2022 |
||||||||||||
| Revenue |
$ | $ | $ | $ | ||||||||||||
| Cost of operations |
||||||||||||||||
| Gross profit |
||||||||||||||||
| General and administrative expenses |
||||||||||||||||
| Income from operations |
||||||||||||||||
| Other income (expense): |
||||||||||||||||
| Interest expense, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Change in fair value of warrant liabilities |
||||||||||||||||
| Other income, net |
||||||||||||||||
| Total other income (expense) |
( |
) | ( |
) | ( |
) | ||||||||||
| Income before income taxes |
||||||||||||||||
| Income tax expense |
||||||||||||||||
| Net income |
||||||||||||||||
| Less accretion of liquidation preference on preferred stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income available to common shareholders |
$ | $ | $ | $ | ||||||||||||
| Weighted average common shares outstanding |
||||||||||||||||
| Basic |
||||||||||||||||
| Diluted |
||||||||||||||||
| Net income per common share |
||||||||||||||||
| Basic |
$ | $ | $ | $ | ||||||||||||
| Diluted |
$ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Concrete Pumping Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
| Three Months Ended July 31, |
Nine Months Ended July 31, |
|||||||||||||
| (in thousands) |
2023 |
2022 |
2023 |
2022 |
||||||||||
| Net income |
$ | $ | $ | $ | ||||||||||
| Other comprehensive income (loss): |
||||||||||||||
| Foreign currency translation adjustment |
( |
) | ( |
) | ||||||||||
| Total comprehensive income |
$ | $ | $ | $ | ||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Concrete Pumping Holdings, Inc.
Condensed 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, except share amounts) |
Shares |
Amount |
||||||||||||||||||||||||||
| Balance, April 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Stock-based compensation expense |
- | |||||||||||||||||||||||||||
| Forfeiture of restricted stock |
( |
) | ||||||||||||||||||||||||||
| Shares issued under stock-based program, net of treasury shares purchased for tax withholding |
||||||||||||||||||||||||||||
| Treasury shares purchased under share repurchase program |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Net income |
- | |||||||||||||||||||||||||||
| Foreign currency translation adjustment |
- | |||||||||||||||||||||||||||
| Balance, July 31, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Common Stock |
Additional Paid-In Capital |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
Accumulated Deficit |
Total |
|||||||||||||||||||||||
| (in thousands, except share amounts) |
Shares |
Amount |
||||||||||||||||||||||||||
| Balance, April 30, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Stock-based compensation expense |
- | |||||||||||||||||||||||||||
| Forfeiture of restricted stock |
( |
) | ||||||||||||||||||||||||||
| Shares issued under stock-based program, net of treasury shares purchased for tax withholding |
||||||||||||||||||||||||||||
| Treasury shares purchased under share repurchase program |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Net income |
- | |||||||||||||||||||||||||||
| Foreign currency translation adjustment |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, July 31, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Concrete Pumping Holdings, Inc.
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited) - (Continued)
| Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total | |||||||||||||||||||||||
| (in thousands, except share amounts) |
Shares |
Amount |
||||||||||||||||||||||||||
| Balance, October 31, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Stock-based compensation expense |
- | |||||||||||||||||||||||||||
| Forfeiture of restricted stock |
( |
) | ||||||||||||||||||||||||||
| Shares issued under stock-based program, net of treasury shares purchased for tax withholding |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Treasury shares purchased under share repurchase program |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Net income |
- | |||||||||||||||||||||||||||
| Foreign currency translation adjustment |
- | |||||||||||||||||||||||||||
| Balance, July 31, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total | |||||||||||||||||||||||
| (in thousands, except share amounts) |
Shares |
Amount |
||||||||||||||||||||||||||
| Balance, October 31, 2021 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||
| Stock-based compensation expense |
- | |||||||||||||||||||||||||||
| Forfeiture of restricted stock |
( |
) | - | - | - | - | - | - | ||||||||||||||||||||
| Shares issued under stock-based program, net of treasury shares purchased for tax withholding |
( |
) | ( |
) | ||||||||||||||||||||||||
| Treasury shares purchased under share repurchase program |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Net income |
- | |||||||||||||||||||||||||||
| Foreign currency translation adjustment |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, July 31, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Concrete Pumping Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the Nine Months Ended July 31, |
||||||||
| (in thousands) |
2023 |
2022 |
||||||
| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Non-cash operating lease expense |
||||||||
| Foreign currency adjustments |
( |
) | ||||||
| Depreciation |
||||||||
| Deferred income taxes |
||||||||
| Amortization of deferred financing costs |
||||||||
| Amortization of intangible assets |
||||||||
| Stock-based compensation expense |
||||||||
| Change in fair value of warrant liabilities |
( |
) | ( |
) | ||||
| Net gain on the sale of property, plant and equipment |
( |
) | ( |
) | ||||
| Provision for bad debt |
( |
) | ||||||
| Net changes in operating assets and liabilities: |
||||||||
| Trade receivables |
( |
) | ( |
) | ||||
| Inventory |
( |
) | ( |
) | ||||
| Prepaid expenses and other assets |
( |
) | ( |
) | ||||
| Accounts payable |
( |
) | ( |
) | ||||
| Accrued payroll, accrued expenses and other liabilities |
||||||||
| Net cash provided by operating activities |
||||||||
| Cash flows from investing activities: |
||||||||
| Purchases of property, plant and equipment |
( |
) | ( |
) | ||||
| Proceeds from sale of property, plant and equipment |
||||||||
| Purchases of intangible assets |
( |
) | ( |
) | ||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds on revolving loan |
||||||||
| Payments on revolving loan |
( |
) | ( |
) | ||||
| Payment of debt issuance costs |
( |
) | ( |
) | ||||
| Purchase of treasury stock |
( |
) | ( |
) | ||||
| Other financing activities |
( |
) | ( |
) | ||||
| Net cash provided by (used in) financing activities |
( |
) | ||||||
| Effect of foreign currency exchange rate changes on cash |
||||||||
| Net increase (decrease) in cash and cash equivalents |
( |
) | ||||||
| Cash and cash equivalents: |
||||||||
| Beginning of period |
||||||||
| End of period |
$ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Concrete Pumping Holdings, Inc.
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
| Nine Months Ended July 31, |
||||||||
| (in thousands) |
2023 |
2022 |
||||||
| Supplemental cash flow information: |
||||||||
| Cash paid for interest |
$ | $ | ||||||
| Cash paid for income taxes |
||||||||
| Non-cash investing and financing activities: |
||||||||
| Equipment purchases included in accrued expenses and accounts payable |
||||||||
| Operating lease right-of-use assets recorded upon adoption of ASC 842 |
||||||||
| Operating lease liabilities recorded upon adoption of ASC 842 |
||||||||
| Operating lease assets obtained in exchange for new operating lease liabilities |
||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Concrete Pumping Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
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 the Company 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 service providers do not contract to purchase, mix, or deliver concrete. Brundage-Bone and Capital collectively have approximately 100 branch locations across approximately
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
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.
Note 2. Summary of Significant Accounting Policies
We describe our significant accounting policies in Note 2 of the notes to consolidated financial statements in our annual report on Form 10-K for the year ended October 31, 2022 ("Annual Report"). During the nine months ended July 31, 2023, there were no significant changes to those accounting policies.
Basis of presentation
Our condensed consolidated balance sheet as of October 31, 2022, which was derived from our audited consolidated financial statements and our unaudited interim consolidated financial statements provided herein have been prepared in accordance with the instructions for Form 10-Q. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted 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 a fair statement of the interim periods. The consolidated results of operations and cash flows for the first nine months of the year are not necessarily indicative of the consolidated results of operations and cash flows that might be expected for the entire year. These condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended October 31, 2022.
Certain prior period amounts have been reclassified in order to conform to the current year presentation.
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.
Revenue recognition
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. Revenue is disaggregated between two accounting standards: (1) ASC 606, Revenue Recognition ("ASC 606") and (2) ASC 842, Leases ("ASC 842").
Leases as Lessor
Our Eco-Pan business involves contracts with customers whereby we are a lessor for the rental component of the contract and therefore, such rental components of the contract are recorded as lease revenue. We account for such rental contracts as operating leases. We recognize revenue from pan rentals in the period earned, regardless of the timing of billing to customers. The lease component of the revenue is disaggregated by a base price that is based on the number of contractual days and a variable component that is based on days in excess of the number of contractual days.
The table below summarizes our revenues as presented in our unaudited consolidated statements of operations for the periods ended July 31, 2023 and 2022 by revenue type and by applicable accounting standard:
| Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Service revenue - ASC 606 | ||||||||||||||||
| Lease fixed revenue – ASC 842 | ||||||||||||||||
| Lease variable revenue - ASC 842 | ||||||||||||||||
| Total revenue | ||||||||||||||||
Newly adopted accounting pronouncements
Accounting Standards Update ("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. Effective October 1, 2021, the Company transitioned all of its GBP borrowings from LIBOR to the Sterling Overnight Index Average ("SONIA") rate. Effective June 29, 2022, the Company transitioned all of its U.S. Dollar borrowings from LIBOR to the Secured Overnight Financing Rate ("SOFR"). See Note 9 for further discussion.
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 ("ROU") 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 adopted the guidance for the year ended October 31, 2022, with an effective date of adoption of November 1, 2021.
Recently issued accounting pronouncements not yet effective
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 smaller reporting companies with fiscal years beginning after December 15, 2022, with early adoption permitted. The Company plans to adopt the guidance during the first quarter of the fiscal year ending October 31, 2024. 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.
Note 3. Business Combinations and Asset Acquisitions
The Company completed
August 2022 (Fiscal 2022) Coastal Acquisition
In August 2022, the Company acquired the property, equipment and intangible assets of Coastal for total purchase consideration of $
The following table represents the final allocation of consideration to the assets acquired and liabilities assumed at their estimated acquisition-date fair values with any measurement-period adjustments included:
| (in thousands) | |||
| Consideration paid: | $ | ||
| Net assets acquired: | |||
| Intangible assets | $ | ||
| Property and equipment | |||
| Liabilities assumed | ( | ) | |
| Total net assets acquired | $ |
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.
Identifiable intangible assets acquired consist of customer relationships of $
Concurrent with closing of the asset purchase agreement, the Company signed leases directly with the seller. The leases were entered into at market rates and the Company recognized an ROU asset and liability of $
November 2021 (Fiscal 2022) Pioneer Acquisition
In November 2021, the Company acquired the assets, no cash, of Pioneer Concrete Pumping Services (“Pioneer”) for total purchase consideration of $
Transaction Costs
Transaction costs include expenses for legal, accounting, and other professionals that were incurred in connection with an asset acquisition or business combination and could not be capitalized under ASC 805. There were no significant transaction costs incurred in each of the three and nine months ended July 31, 2023 and 2022.
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information presents the combined results of operations for the Company and gives effect to the Coastal business combination discussed above as if it had occurred on November 1, 2020. The pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations that would have been realized if the Coastal business combination had been completed on November 1, 2020, nor does it purport to project the results of operations of the combined company in future periods. The pro forma financial information does not give effect to any anticipated integration costs related to the acquired company.
The unaudited pro forma financial information is as follows:
| Three Months Ended July 31, | Nine Months Ended July 31, | |||||||
| (in thousands) | 2022 | 2022 | ||||||
| Revenue | $ | $ | ||||||
| Pro forma revenue adjustments by Business Combination | ||||||||
| Coastal | ||||||||
| Total pro forma revenue | $ | $ | ||||||
| Net income | $ | $ | ||||||
| Pro forma net income adjustments by Business Combination | ||||||||
| Coastal | ||||||||
| Total pro forma net income | $ | $ | ||||||
Significant pro forma adjustments include:
| ● | Tangible and intangible assets are assumed to be recorded at their estimated fair values as of November 1, 2021 and are depreciated or amortized over their estimated useful lives; and |
| ● | The Company incurred approximately $ |
Coastal’s contribution to the Company's revenue for the three and nine months ended July 31, 2023 was $
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 as recorded due to the short-term maturity of these instruments, which approximates fair value. The Company’s outstanding obligations on its asset-backed loan ("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. There were no changes since October 31, 2022 in the Company's valuation techniques used to measure 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 as of July 31, 2023 and October 31, 2022 is presented in the table below based on the prevailing interest rates and trading activity of the Senior Notes.
| As of July 31, | As of October 31, | |||||||||||||||
| 2023 | 2022 | |||||||||||||||
| (in thousands) | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||
| Senior Notes | $ | $ | $ | $ | ||||||||||||
Warrants
At July 31, 2023 and October 31, 2022, there were
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 2 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 5. Prepaid Expenses and Other Current Assets
The significant components of prepaid expenses and other current assets as of July 31, 2023 and October 31, 2022 are comprised of the following:
| As of July 31, | As of October 31, | |||||||
| (in thousands) | 2023 | 2022 | ||||||
| Expected recoveries related to self-insured commercial liabilities | $ | $ | ||||||
| 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 as of July 31, 2023 and October 31, 2022 are comprised of the following:
| As of July 31, | As of October 31, | |||||||
| (in thousands) | 2023 | 2022 | ||||||
| Land, building and improvements | $ | $ | ||||||
| Finance 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 and nine months ended July 31, 2023 and 2022 is as follows:
| Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Cost of operations | $ | $ | $ | $ | ||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total depreciation expense | $ | $ | $ | $ | ||||||||||||
Note 7. Goodwill and Intangible Assets
The Company has recognized goodwill and certain intangible assets in connection with prior business combinations.
There were
The following table summarizes the composition of intangible assets as of July 31, 2023 and October 31, 2022:
| As of July 31, | ||||||||||||||||||||||||
| 2023 | ||||||||||||||||||||||||
| Weighted Average | Gross | Foreign Currency | Net | |||||||||||||||||||||
| Remaining Life | Carrying | Accumulated | Translation | Carrying | ||||||||||||||||||||
| (in thousands) | (in Years) | Value | Impairment | Amortization | Adjustment | Amount | ||||||||||||||||||
| Intangibles subject to amortization: | ||||||||||||||||||||||||
| Customer relationship | $ | $ | - | $ | ( | ) | $ | $ | ||||||||||||||||
| Trade name | - | ( | ) | |||||||||||||||||||||
| Assembled workforce | - | ( | ) | - | ||||||||||||||||||||
| Noncompete agreements | - | ( | ) | - | ||||||||||||||||||||
| Indefinite-lived intangible assets: | ||||||||||||||||||||||||
| Trade names (indefinite life) | - | ( | ) | - | - | |||||||||||||||||||
| Total intangibles | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||
| As of October 31, | ||||||||||||||||||||||||
| 2022 | ||||||||||||||||||||||||
| Weighted Average | Gross | Foreign Currency | Net | |||||||||||||||||||||
| Remaining Life | Carrying | Accumulated | Translation | Carrying | ||||||||||||||||||||
| (in thousands) | (in Years) | Value | Impairment | Amortization | Adjustment | Amount | ||||||||||||||||||
| Intangibles subject to amortization: | ||||||||||||||||||||||||
| Customer relationship | $ | $ | - | $ | ( | ) | $ | $ | ||||||||||||||||
| Trade name | - | ( | ) | $ | ||||||||||||||||||||
| Assembled workforce | - | ( | ) | - | $ | |||||||||||||||||||
| Noncompete agreements | - | ( | ) | - | $ | |||||||||||||||||||
| Indefinite-lived intangible assets: | ||||||||||||||||||||||||
| Trade names (indefinite life) | - | ( | ) | - | - | $ | ||||||||||||||||||
| Total intangibles | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||
The changes in the carrying value of goodwill by reportable segment for the nine months ended July 31, 2023 are as follows:
| Reportable Segment | As of October 31, 2022 | Foreign Currency Translation | As of July 31, 2023 | |||||||||
| (in thousands) | ||||||||||||
| U.S. Concrete Pumping | $ | $ | $ | |||||||||
| U.K. Operations | ||||||||||||
| U.S. Concrete Waste Management Services | ||||||||||||
| Total | $ | $ | $ | |||||||||
Note 8. Other Non-Current Assets
The significant components of other non-current assets as of July 31, 2023 and October 31, 2022 are comprised of the following:
| As of July 31, | As of October 31, | |||||||
| (in thousands) | 2023 | 2022 | ||||||
| Expected recoveries related to self-insured commercial liabilities | $ | $ | ||||||
| Other non-current assets | ||||||||
| Total other non-current assets | $ | $ | ||||||
Note 9. Long Term Debt and Revolving Lines of Credit
The table below is a summary of the composition of the Company’s debt balances as of July 31, 2023 and October 31, 2022:
| As of July 31, | As of October 31, | |||||||||||
| (in thousands) | Interest Rates | Maturities | 2023 | 2022 | ||||||||
| Revolving loan - short term | Varies | January 2026 | $ | $ | ||||||||
| Senior Notes - all long term | February 2026 | |||||||||||
| Total debt, gross | ||||||||||||
| Less: Unamortized deferred financing costs offsetting long term debt | ( | ) | ( | ) | ||||||||
| Less: Revolving loan - short term | ( | ) | ( | ) | ||||||||
| Long term debt, net of unamortized deferred financing costs | $ | $ | ||||||||||
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 $
On July 29, 2022, the ABL Facility was amended to, among other changes, increase the maximum revolver borrowings available to be drawn thereunder from $
On June 1, 2023, the ABL Facility was amended to, among other changes, (1) increase the maximum revolver borrowings available to be drawn thereunder from $
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 1st and August 1st 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; and |
|
| ● | 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 July 31, 2023 was $
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 $ |
|
| ● | Borrowing capacity available for standby letters of credit of up to $ |
|
| ● | All loans advanced will mature and be due and payable in full on the earlier of (a) June 1, 2028 and (b) the date that is 180 days prior to (i) the final stated maturity date of the Senior Notes or (ii) the date the Senior Notes become due and payable; |
|
| ● | Amounts borrowed may be repaid at any time, subject to the terms and conditions of the agreement; |
|
| ● | Through May 31, 2023, borrowings in GBP bore interest at the SONIA rate plus an applicable margin currently set at |
| ● | Through June 29, 2022, borrowings in U.S. Dollars bore interest at either (1) an adjusted LIBOR rate plus an applicable margin of | |
| ● | U.S. ABL Facility obligations are 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 are 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 U.K. subsidiaries, and by each of the US ABL Borrowers and the US ABL Guarantors, subject to certain exceptions; and | |
| ● | 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. |
The outstanding balance under the ABL Facility as of July 31, 2023 was $
In addition, as of July 31, 2023 the Company had $
As of July 31, 2023 we had $
As of July 31, 2023 and October 31, 2022, the weighted average interest rate for borrowings under the ABL Facility was
Note 10. Accrued Payroll and Payroll Expenses
The following table summarizes accrued payroll and expenses as of July 31, 2023 and October 31, 2022:
| As of July 31, | As of October 31, | |||||||
| (in thousands) | 2023 | 2022 | ||||||
| Accrued vacation | $ | $ | ||||||
| Accrued payroll | ||||||||
| Accrued bonus | ||||||||
| Accrued employee-related taxes | ||||||||
| Other accrued | ||||||||
| Total accrued payroll and payroll expenses | $ | $ | ||||||
Note 11. Accrued Expenses and Other Current Liabilities
The following table summarizes accrued expenses and other current liabilities as of July 31, 2023 and October 31, 2022:
| As of July 31, | As of October 31, | |||||||
| (in thousands) | 2023 | 2022 | ||||||
| Accrued self-insured commercial liabilities | $ | $ | ||||||
| Accrued self-insured health liabilities | ||||||||
| Accrued interest | ||||||||
| Accrued equipment purchases | ||||||||
| Accrued property, sales and use tax | ||||||||
| Accrued professional fees | ||||||||
| Other | ||||||||
| Total accrued expenses and other liabilities | $ | $ | ||||||
Note 12. Income Taxes
The following table summarizes income before income taxes and income tax expense for the three and nine months ended July 31, 2023 and 2022:
| Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Income before income taxes | $ | $ | $ | $ | ||||||||||||
| Income tax expense | $ | $ | $ | $ | ||||||||||||
The effective tax rate for the three and nine months ended July 31, 2023 and 2022 was primarily impacted by the respective change in fair value of warrant liabilities, which is not recognized for tax purposes.
As of July 31, 2023 and October 31, 2022, the Company had deferred tax liabilities, net of deferred tax assets, of $
Note 13. Commitments and Contingencies
Insurance
Commercial Self-Insured Losses
The Company retains a significant portion of the risk for workers' compensation, automobile, and general liability losses (“self-insured commercial liability”). Reserves have been recorded that reflect the undiscounted estimated liabilities including claims incurred but not reported. When a recognized liability is covered by third-party insurance, the Company records an insurance claim receivable to reflect the covered liability. Amounts estimated to be paid within one year have been included in Accrued expenses and other current liabilities, with the remainder included in Other liabilities, non-current on the Consolidated Balance Sheets. Insurance claims receivables that are expected to be received from third-party insurance within one year have been included in Prepaid expenses and other current assets, with the remainder included in Other non-current assets on the Consolidated Balance Sheets.
The following table summarizes as of July 31, 2023 for (1) recorded liabilities, related to both asserted as well as unasserted insurance claims and (2) any related insurance claims receivables.
| Classification on the Condensed | As of July 31, | ||||
| (in thousands) | Consolidated Balance Sheets | 2023 | |||
| Self-insured commercial liability, current | Accrued expenses and other current liabilities | $ | |||
| Self-insured commercial liability, non-current | Other liabilities, non-current | ||||
| Total self-insured commercial liabilities | |||||
| Expected recoveries related to self-insured commercial liabilities, current | Prepaid expenses and other current assets | ||||
| Expected recoveries related to self-insured commercial liabilities, non-current | Other non-current assets | ||||
| Total expected recoveries related to self-insured commercial liabilities | |||||
| Total self-insured commercial liability, net of expected recoveries | $ | ||||
Medical Self-Insured Losses
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. The Company contracts with a third-party administrator for tasks including, but not limited to, processing claims and remitting benefits. As of July 31, 2023, 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 14. Stockholders’ Equity
Share Repurchase Program
In January 2023, the board of directors of the Company approved a $
The following table summarizes the shares repurchased, total cost of shares repurchased and average price per share for the three and nine months ended July 31, 2023:
| Three Months Ended July 31, | Nine Months Ended July 31, | |||||||
| (in thousands, except price per share) | 2023 | 2023 | ||||||
| Shares repurchased | ||||||||
| Total cost of shares repurchased | $ | $ | ||||||
| Average price per share | $ | $ | ||||||
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.
The following table summarizes realized compensation expense related to stock options and restricted stock awards in the accompanying condensed consolidated statements of operations:
| Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Compensation expense – stock options | $ | $ | $ | $ | ||||||||||||
| Compensation expense – restricted stock awards | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Note 16. Earnings Per Share
The Company calculates earnings per share in accordance with ASC 260, Earnings Per Share. For purposes of calculating earnings 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. Diluted earnings per share is based upon the weighted average number of shares as determined for basic earnings per share plus shares potentially issuable in conjunction with unvested restricted stock awards, incentive stock options, non-qualified stock options and shares of zero-dividend convertible perpetual preferred stock outstanding.
The table below shows our basic and diluted EPS calculations for the three and nine months ended July 31, 2023 and 2022:
| Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
| (in thousands, except share and per share amounts) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Net income (numerator): | ||||||||||||||||
| Net income attributable to Concrete Pumping Holdings, Inc. | $ | $ | $ | $ | ||||||||||||
| Less: Accretion of liquidation preference on preferred stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: Undistributed earnings allocated to participating securities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income attributable to common stockholders (numerator for basic earnings per share) | $ | $ | $ | $ | ||||||||||||
| Add back: Undistributed earnings allocated to participating securities | ||||||||||||||||
| Add back: Accretion of liquidation preference on preferred stock | ||||||||||||||||
| Less: Undistributed earnings reallocated to participating securities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Numerator for diluted earnings per share | $ | $ | $ | $ | ||||||||||||
| Weighted average shares (denominator): | ||||||||||||||||
| Weighted average shares - basic | ||||||||||||||||
| Weighted average shares - diluted | ||||||||||||||||
| Basic earnings per share | $ | $ | $ | $ | ||||||||||||
| Diluted earnings per share | $ | $ | $ | $ | ||||||||||||
For the three and nine months ended July 31, 2023 and 2022,