Arcosa, Inc. · NYSE:ACA
Arcosa — Investor Presentation (November 2018)
51 slides from Arcosa's investor presentation, Nov 5, 2018
Slide 1: Investor Presentation November 2018
Investor Presentation November 2018
Slide 2: Forward-Looking Statements
Forward-Looking Statements Moving Infrastructure Forward — Investor Presentation, November 2018 2 Some statements in this presentation, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements incl
Slide 3: How to Find Us
How to Find Us Moving Infrastructure Forward — Investor Presentation, November 2018 3 Investor ContactInvestorResources@arcosa.com NYSE tickerACA Our websitewww.arcosa.com HeadquartersArcosa, Inc.500 North Akard StreetDallas, Tx 75201
Slide 4: Agenda
Agenda Company overview and strategic roadmapBusiness segment highlightsFinancial overview and capital allocation strategy Moving Infrastructure Forward — Investor Presentation, November 2018 4
Slide 5: Strategic Rationale for the Separation
Enhances Focus of Each Company Arcosa to focus on growing market opportunities in infrastructure spendingTrinity Industries to operate integrated rail leasing, manufacturing, and services business Moving Infrastructure Forward — Investor Presentation, November 2018 5 Enables Each Company to Optimize
Slide 6: Arcosa By the Numbers
Moving Infrastructure Forward — Investor Presentation, November 2018 6 $182MEBITDA ~$200MCash at spin, with no material outstanding debt $1.4BRevenue Arcosa By the Numbers A new public company with an established operating history and financial flexibility ~40Operating Locations across N. America $1
Slide 7: Established businesses with additional potential to thrive
Established businesses with additional potential to thrive in Arcosa’s new structure Moving Infrastructure Forward — Investor Presentation, November 2018 7 Revenue Note: Revenue and Adj. EBITDA margin are LTM 06/30/2018. See Adjusted EBITDA reconciliation in Appendix $785M ENERGY WIND TOWERS UTILITY
Slide 8: Investment Case
Moving Infrastructure Forward — Investor Presentation, November 2018 8 Investment Case Stage 1 plan underway to execute on our long term vision Established businesses with additional potential to thrive in Arcosa’s new structure Barge recovery to provide near term growth Experienced leadership team
Slide 9: Long term vision for Arcosa
Moving Infrastructure Forward — Investor Presentation, November 2018 9 Long term vision for Arcosa Improve returns on invested capital Grow in attractive markets where we can achieve sustainable competitive advantages Reduce the complexity and cyclicality of the overall business
Slide 10: Stage Priorities
Stage 1 Priorities Moving Infrastructure Forward — Investor Presentation, November 2018 10 Grow Construction Products organically and through acquisitions Expand Transport-ation Products organically as barge and rail markets recover Improve Energy Equipment’s operational performance while pursuing d
Slide 11: Broad infrastructure market exposure creates growth opportunities
Broad infrastructure market exposure creates growth opportunities across construction, energy, and transportation Moving Infrastructure Forward — Investor Presentation, November 2018 11 Sources: American Society of Civil Engineers, Oxford Economics Recent estimates suggest that improving U.S. infras
Slide 12: A separation that provides the foundation for a strong future
A separation that provides the foundation for a strong future Moving Infrastructure Forward — Investor Presentation, November 2018 12 Liquidity to fund growth opportunities Healthy balance sheet ~$200M of cash, plus $400M unsecured revolving credit facilityHealthy free cash flow and relatively light
Slide 13: Agenda
Agenda Company overview and strategic roadmapBusiness segment highlightsFinancial overview and capital allocation strategy 13 Moving Infrastructure Forward — Investor Presentation, November 2018
Slide 14: Construction Products Segment Overview
Construction Products Segment Overview Key Figures REVENUE ProductS by product type ($M) Natural sand, gravel and limestone base Shale & clay expanded and hardened in a rotary kiln Steel & aluminum trench shoring products and systems $288M Revenue 26% Adjusted EBITDA Margin $30B+ Estimated annual ma
Slide 15: Aggregates Overview
Aggregates Overview Aggregates business operates in favorable Texas and Gulf Coast markets, with opportunities to expand in this fragmented industry Population and GDP growth in the “Texas Triangle” projected to outpace the national average from 2018-2025Texas Department of Transportation’s (TXDOT)
Slide 16: Specialty Materials Overview
Specialty Materials Overview Specialty lightweight aggregates business has geographic and end market diversity We operate 7 lightweight aggregate locations across the United States Road and bridge construction Residential/ commercial Environmental / Horticulture Other specialty markets Nationwide Fo
Slide 17: Aggregates and Specialty Materials Growth
Asset swap for multiple lightweight aggregates operating plants Acquisition of multiple lightweight aggregates operating plants Acquisition of multiple lightweight aggregates operating plants Aggregates and Specialty Materials Growth Moving Infrastructure Forward — Investor Presentation, November 20
Slide 18: Construction Site Support Overview
Construction Site Support Overview Trench shoring is a growing platform, driven by nationwide infrastructure spending and regulatory and safety standards Diverse Product Portfolio Shoring products apply pressure to the walls of a trench or hole Increasing focus on worker safety and OSHA compliance G
Slide 19: Energy Equipment Segment Overview
Energy Equipment Segment Overview Moving Infrastructure Forward — Investor Presentation, November 2018 19 WIND TOWERS UTILITY STRUCTURES RESIDENTIAL/COMMERCIAL/AGRICULTURAL STORAGE INDUSTRIAL SCALE & FIELD ERECTED STORAGE 585(75%) Utility structuresand wind towers 200(25%) Storage tanks and other Se
Slide 20: Wind Power Market Outlook
Wind Power Market Outlook Moving Infrastructure Forward — Investor Presentation, November 2018 20 Wind is projected to be competitive on an unsubsidized basis in 22 states by 2022 … …resulting in a market driven business model Source: MAKE Consulting (2017 North America Wind Power Outlook) Industry
Slide 21: Storage Tank Market Outlook
Moving Infrastructure Forward — Investor Presentation, November 2018 21 Storage tanks for gas and liquids, including:Liquefied petroleum gasesNatural gas liquidsCO2NitrogenAnhydrous ammonia (NH3)ChlorineRefrigerant gases Pressurized storage spheresField-erected API storage tanks LPG bobtailsLarge tr
Slide 22: Utility Structures Market Outlook
Reliability, renewables, and reducing congestion continue to drive transmission investment… …and industry forecasts point towards robust spending in the next several years Other Reliability Renewables integration Economics/congestion 1% 13% Source: NERC Long Term Reliability Assessment (2017) Source
Slide 23: Transportation Products Segment
Transportation Products Segment Established brands and products primed for growth astransportation markets recover $353M Revenue 16% Adjusted EBITDA Margin $5B+ Estimated annual market size TANK BARGES HOPPER BARGES RAILCAR AXLES RAILCAR COUPLING DEVICES FIBERGLASS COVERS 217(62%) Components 136(38%
Slide 24: Components Overview
Axles for freight, tank, and passenger railcarsCrane wheelsIndustrial wheelsGear blanks Railcar couplers and related productsIndustrial and mining castings FORGINGS Primary Products Brands CASTINGS Moving Infrastructure Forward — Investor Presentation, November 2018 24 Components Overview Arcosa’s c
Slide 25: Barge Overview
Marine Hardware and Fiberglass covers Primary Products Tank barges Moving Infrastructure Forward — Investor Presentation, November 2018 25 Barge Overview Arcosa is an industry leader in barge manufacturing, fiberglass barge covers, and marine hardware Primary end markets Refined productsPetrochemica
Slide 26: Barge Market Overview
Mississippi River System Columbia River System Gulf Intracoastal Waterway Atlantic Intracoastal Waterway Other waterways Pittsburgh St. Louis New Orleans Minneapolis Houston Chicago Kansas City Cincinnati Columbus Knoxville Portland Tulsa Atlanta New York City San Francisco Miami Washington D.C. Shr
Slide 27: Barge Overview: Revenue and Adjusted EBITDA
Moving Infrastructure Forward — Investor Presentation, November 2018 27 2016 2013 2015 2010 2012 2011 2014 2017 2018(P) Revenue Adjusted EBITDA Inland Barge business$ Millions Healthy returns on capital over the cycle, as Adj. EBITDA / Assets averaged 62% from 2010-2017Even in the significant downtu
Slide 28: Barge Market Outlook
Inland Barge businessBook to Bill ratio ($ Value of Orders Signed: $ Value of Orders Produced) 2Q16 1Q16 3Q16 3Q17 2Q17 4Q16 1Q17 4Q17 1Q18 2Q18 1 3Q18 Backlog Growing Backlog Shrinking Moving Infrastructure Forward — Investor Presentation, November 2018 28 Barge Market Outlook Orders in the first h
Slide 29: Agenda
Agenda Company overview and strategic roadmapBusiness segment highlightsFinancial overview and capital allocation strategy 29 Moving Infrastructure Forward — Investor Presentation, November 2018
Slide 30: Financial overview
Moving Infrastructure Forward — Investor Presentation, November 2018 30 Financial overview Key messages Higher revenue and EBITDA expected in 2019 Liquidity and balance sheet capacity to fund growth Disciplined capital allocation process Lean operating model, with focus on improving ROIC
Slide 31: Stage Priorities: Actions completed or underway
Grow Construction Products Stage 1 Priorities Moving Infrastructure Forward — Investor Presentation, November 2018 31 Actions completed or underway Improve Energy Equipment Expand Transportation Products Operate a flat corporate structure Pursuing pipeline of acquisitions across aggregates, specialt
Slide 32: Revenue and EBITDA with 2019 Guidance
Revenue ($M’s) 2017 1,421 2015 1,704 LTM 6/30/18 2016 2019P 1,462 2,140 1,550-1,650 2019 Guidance Overall EBITDA expected to be higher in 2019 than 2018, driven by barge recovery and operating improvements EBITDA ($M’s) 2019P 2016 377 2015 196 2017 LTM 6/30/18 263 182 180-195 Energy Equipment Transp
Slide 33: 2019 Guidance
Positives from 2018 Challenges from 2018 Moving Infrastructure Forward — Investor Presentation, November 2018 33 2019 Guidance We expect EBITDA of $180-195M in 2019 2019 revenue guidance: $1,550-1,650M2019 EBITDA guidance: $180-195M $10-15M of incremental public company costs (will be in corporate c
Slide 34: Liquidity and balance sheet capacity to pursue growth
Liquidity and balance sheet capacity to pursue growth Moving Infrastructure Forward — Investor Presentation, November 2018 34 Strong Available LiquidityPosition ~$200M of cash at separationNo material outstanding debt at time of separationUnencumbered balance sheet 5-YearCredit Facility $400M five-y
Slide 35: Capital Allocation Priorities
Organic investments Balance between growth and maintenance investmentsCapital expenditures averaged ~$84M annually in 2016 and 2017Construction Products: $47M (includes reserve investments)Energy: $26MTransportation: $11MTarget short cash payback periods for internal investments Moving Infrastructur
Slide 36: How we assess potential acquisitions
Fit with broader strategy of growing in attractive infrastructure-related marketsRe-positioning of portfolio to more stable, less cyclical profileLeverage from current manufacturing or mining/processing platforms Exposure to fast-growing submarkets within broader infrastructure marketAttractive top
Slide 37: Focus on improving ROIC
37 Capital Expenditures ($M’s) Net cash from operating activities ($M’s) Moving Infrastructure Forward — Investor Presentation, November 2018 2015 LTM 6/30/18 2016 2017 Pre-Tax Return on Invested Capital 2015 2016 9.5% 2017 8.4% LTM 6/30/18 15.7% 14.6% Focus on improving ROIC Cash generation has bee
Slide 38: Lean operating model
Lean operating model Guiding principles Reduce layers to expedite decision making and enhance connections with customers and other stakeholdersEncourage an entrepreneurial cultureMaintain small corporate team performing limited set of activitiesLeverage external support and technological innovation
Slide 39: Stewards of the environment and committed to sustainability
We are stewards ofthe environment and committed to sustainability A leading producer of wind towers for renewable power generation Arcosa headquarters is LEED Gold, Energy Star CertifiedInstituted sustainability program to track environmental metrics Our people contribute to the communities in which
Slide 40: Culture of trust with investors and stakeholders
As a leadership team, we are committed to building a culture of trust with our investors, analysts, and other stakeholders Moving Infrastructure Forward — Investor Presentation, November 2018 40 Credibility Accessibility Transparency
Slide 41: Appendix
Appendix
Slide 42: Management team
Moving Infrastructure Forward — Investor Presentation, November 2018 42 Mary HendersonChief Accounting Officer Jess CollinsTransportation Products Gail PeckSVP, Finance & Treasurer Reid EsslConstruction Products Kathryn CollinsChief HR Officer Kerry ColeEnergy Equipment Bryan StevensonChief Legal Of
Slide 43: Board of directors
43 Moving Infrastructure Forward — Investor Presentation, November 2018 43 Rhys Best, Non-Executive Chairman of ArcosaFormer Director of Trinity Industries, Inc. Non-Executive Chairman of MRC Global, Inc. Antonio CarrilloPresident and CEO of ArcosaFormer Director of Trinity Industries, Inc. Joe Alva
Slide 44: Construction Products Segment Overview
Nationwide footprint to cost-effectively serve customers across the countrySpecialized technical sales force to work with customers on lightweight material applicationsProcessing expertise to run critical rotary kiln operations 7 operating locations across the United States Industry-leading innovati
Slide 45: Energy Equipment Segment Overview
Energy Equipment Segment Overview Footprint Value proposition Wind towers Utility structures Storage tanks 4 manufacturing plants currently producing wind towers in US and Mexico 6 manufacturing plants currently producing utility structures in US and Mexico 3 manufacturing locations producing energy
Slide 46: Transportation Products Operating Overview
Industry-leading inland barge manufacturing capacity, with proven ability to operate in cyclical marketsFlexibility to shift between barge typesLong-term relationships with leading barge operatorsStrong relationships with steel millsAlso provide fiberglass barge covers and a full line of deck hardwa
Slide 47: Barge Market Overview: Cargo by Commodity
Liquid cargo transported by inland barge, by commodity (%) Dry cargo transported by inland barge, by commodity (%) Coal and Coal Coke Food and Farm Products Sand, Gravel, Stone,And Other ManufacturedGoods / Other Iron / Ores / Scrap Sources: US Corps of Engineers (2016-2017), Informa Economics Total
Slide 48: EBITDA reconciliation: Arcosa
EBITDA reconciliation: Arcosa 48 2019P LTM Fiscal Years ended December 31, $ Millions Low High 6/18 2017 2016 2015 Net income $81.0 $89.0 $89.0 $89.7 $123.0 $135.0 Add: Interest expense $2.0 $2.0 $0.0 $0.0 $0.0 $0.4 Provision/(Benefit) for income taxes $27.0 $29.0 $25.9 $40.4 $74.2 $84.2 Depreciatio
Slide 49: Adjusted EBITDA reconciliation by Arcosa Segment
LTM Fiscal Years ended December 31, $ Millions 6/18 2017 2016 2015 Construction Products Segment Operating Profit $54.8 $53.7 $59.3 $50.4 Add: Depreciation & amortization expense $20.0 $18.4 $16.0 $15.6 Adjusted EBITDA $74.8 $72.1 $75.3 $66.0 Energy Equipment Segment Operating Profit $61.7 $78.4 $87
Slide 50: Adjusted EBITDA reconciliation: Trinity's Historic Barge Segment
$ Millions Fiscal Years ended December 31, 2018(P) (1) 2017 2016 2015 2014 Barge (FY14 – FY18(P)) Operating Profit $5.1 $6.4 $45.3 $117.0 $114.4 Add: Depreciation & amortization expense $7.3 $7.3 $8.4 $10.5 $9.3 Adjusted EBITDA $12.4 $13.7 $53.7 $127.5 $123.7 Fiscal Years ended December 31, Barge (F
Slide 51: Investor Presentation November 2018
Investor Presentation November 2018