Arcosa, Inc. · NYSE:ACA
Arcosa — Investor Day (October 2018)
83 slides from Arcosa's investor day presentation, October 2018
Slide 1: Investor Presentation
Investor Presentation October 2018
Slide 2: How to Find Us
How to Find Us OUR WEBSITE NYSE TICKER www.arcosa.com ACA HEADQUARTERS INVESTOR CONTACT Arcosa, Inc. InvestorResources@arcosa.com 500 North Akard Street Dallas, Tx 75201 2 / Moving Infrastructure Forward — Investor Presentation, October 2018
Slide 3: Agenda
Agenda 1:00 - 1:05 Introduction: Gail Peck, SVP, Finance & Treasurer 1:05 -1:25 Opening Remarks & Strategic Roadmap: Antonio Carrillo, President & CEO 1:25 - 1:45 Construction Products Overview: Reid Essl, President, Construction Products 1:45 - 2:05 Energy Equipment Overview: Kerry Cole, President,
Slide 4: Today's presenters
Today’s presenters Antonio Carrillo Reid Essl Kerry Cole Jess Collins Scott Beasley President & President, President, President, Chief Financial Chief Executive Construction Energy Transportation Officer Officer Products Equipment Products 4 / Moving Infrastructure Forward — Investor Presentation, O
Slide 5: Forward Looking Statements
Forward Looking Statements 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 include statements about Arcosa’s estimates, expectations, beliefs, intenti
Slide 6: Agenda
Agenda Company overview and strategic roadmap Business segment highlights Financial overview and capital allocation strategy Leadership team 6 / Moving Infrastructure Forward — Investor Presentation, October 2018
Slide 7: Strategic Rationale
Strategic Rationale For the separation of Arcosa from Trinity Industries Enhances Focus of Enables Each Enables Arcosa and Each Company Company to Optimize Trinity to Pursue Capital Structure Distinct Growth Strategies • Arcosa to focus on growing market opportunities in infrastructure spending • Tr
Slide 8: Arcosa By the Numbers
Arcosa By the Numbers A new public company with an established operating history and financial flexibility $1.4B $182M ~$200M Cash at spin, with no Revenue EBITDA material debt $119M 85+ ~40 Operating Locations Operating Profit Years of Operating History across N. America Note: Revenue, Operating Pr
Slide 9: Established businesses with additional potential to thrive in Arcosa's new structure
Established businesses with additional potential to thrive in Arcosa’s new structure Markets CONSTRUCTION ENERGY T R A N S P O R TAT I O N Revenue $288M $785M $353M A G G R E G AT E S WIND TOWERS BARGES S P E C I A LT Y UTILITY COMPONENTS M AT E R I A L S STRUCTURES CONSTRUCTION S T O R A G E TA N K
Slide 10: Investment Case
Investment Case Established businesses Broad infrastructure market Stage 1 plan underway to with additional potential to exposure creates execute on our long term thrive in Arcosa’s new opportunities for growth vision structure and strategic optionality Barge recovery to provide Expected Revenue and
Slide 11: Long term vision for Arcosa
Long term vision for Arcosa Improve returns on invested capital Reduce the complexity and cyclicality of the Grow in attractive overall business markets where we can achieve sustainable competitive advantages 11 / Moving Infrastructure Forward — Investor Presentation, October 2018
Slide 12: Stage 1 Priorities
Stage 1 Priorities Grow Improve Expand Operate a flat Construction Energy Transport- and Products Equipment’s ation responsive organically and operational Products corporate through performance while organically as structure acquisitions pursuing barge and rail disciplined growth markets recover 12
Slide 13: Broad infrastructure market exposure creates growth opportunities
Broad infrastructure market exposure creates growth opportunities across construction, energy, and transportation Replacement of New infrastructure Changing energy Recovery in key aging infrastructure spending to meet landscape transportation population growth markets Recent estimates suggest Lo
Slide 14: A separation that provides the foundation for a strong future
A separation that provides the foundation for a strong future Liquidity to fund Healthy balance sheet Independent structure growth opportunities ~$200M of cash, plus No material debt at time Trinity to distribute 100% expect $400M revolving of spin of shares to Trinity credit facility No mat
Slide 15: Stage 1 Priorities
Stage 1 Priorities Actions completed or underway Grow Pursuing pipeline of acquisitions across aggregates, specialty materials, and construction site support Construction Products Extending Continuous Improvement program from Wind Towers to rest Improve Energy of Energy Equipment Equipment In
Slide 16: Agenda
Agenda Company overview and strategic roadmap Business segment highlights Financial overview and capital allocation strategy Leadership team 16 / Moving Infrastructure Forward — Investor Presentation, October 2018
Slide 17: Construction Products
ARCOSA CONSTRUCTION PRODUCTS
Slide 18: Construction Products Summary
Construction Products Summary Long term demand drivers are positive across the segment Our businesses have competitive advantages in compelling markets that lead to attractive margins and returns Competitive pricing in certain products can be mitigated over time by margin expansion potential i
Slide 19: Construction Products Segment Overview
Construction Products Segment Overview PRODUCTS KEY FIGURES REVENUE (LTM 6/30/18) by product type ($M) Construction $288M site support SPECIALTY CONSTRUCTION Revenue AGGREGATES MATERIALS SITE SUPPORT 71$* (25%) (*) 26% Natural sand, gravel Shale & clay Steel & aluminum Adjusted EBITDA and limestone
Slide 20: Construction Products Market Outlook
Construction Products Market Outlook Long term demand drivers across the segment are positive, driven by both private and public demand Key private demand drivers Key public demand drivers Public highway spending Residential / Commercial / Industrial construction activity driven by: ― Multi-year
Slide 21: Aggregates Overview
Aggregates Overview Aggregates business operates in favorable Texas and Gulf Coast markets, with opportunities to expand in this fragmented industry Operate 11 locations across 3 important Attractive market fundamentals in markets in Texas and the Gulf Coast Texas and Gulf Coast markets Population
Slide 22: Aggregates Competitive Advantages
Aggregates Competitive Advantages We have developed a number of competitive advantages that help us generate strong returns Strategically located Operating expertise reserves in fast growing in mining and Texas & Gulf Coast processing materials markets Deep customer relationships with major Regional
Slide 23: Aggregates Growth Opportunities
Aggregates Growth Opportunities The aggregates business has attractive growth opportunities Our relationships and We also pursue reserve Fragmented industry operating experience lead acquisitions to build creates opportunities to a pipeline of operating strategic advantages company opportunities $
Slide 24: Specialty Materials Overview
Specialty Materials Overview Specialty lightweight aggregates business has geographic and end market diversity Nationwide Footprint Diverse End Markets Road and bridge construction Residential/ commercial Environmental / Horticulture Other specialty markets We operate 7 lightweight aggregate locatio
Slide 25: Lightweight Aggregates Competitive Advantages
Lightweight Aggregates Competitive Advantages Our competitive advantages help us serve customers and generate strong returns Nationwide footprint to cost-effectively serve Processing expertise in customers across critical rotary kiln operations the country Specialized technical sales force to work w
Slide 26: Specialty Materials Growth Opportunities
Specialty Materials Growth Opportunities We see attractive acquisition opportunities to expand our specialty materials platform Diverse or Specialized Mining of Unique Materials Value-Added Processing End Markets Specialty Materials > $4 Billion Market Opportunity Source: Private 3rd Party Data 26 /
Slide 27: Aggregates and Specialty Materials Growth
Aggregates and Specialty Materials Growth Track record of disciplined acquisitions to expand aggregates and specialty materials platforms Combined Aggregates and Specialty Materials Revenue $ Millions 213 217 205 192 152 113 65 2012 2013 2014 2015 2016 2017 LTM Asset swap for Acquisition of Acquisit
Slide 28: 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 Growing End Markets Road and bridge Water and sewer construction construction Pipeline Utility construction construction
Slide 29: Trench Shoring Competitive Advantages
Trench Shoring Competitive Advantages Our trench shoring business has a number of competitive advantages that help us serve customers Industry-leading Track record of value- manufacturing capacity creating acquisitions Manufacturing experience Deep customer to meet stringent relationships job site r
Slide 30: Trench Shoring Products Growth Opportunities
Trench Shoring Products Growth Opportunities We have built a platform in construction site support, and have attractive growth opportunities 2012 2017 Future Growth CONSTRUCTION SITE SUPPORT Potential areas of growth Initial acquisition of 2 market-leading Acquisition of additional trench Organic
Slide 31: Construction Products Summary
Grow Construction Products Summary Construction Products Three well-established business units serving the construction industry Balanced product portfolio with organic growth potential through product adjacencies and geographical expansion Fragmented market with significant consolidation and
Slide 32: Energy Equipment
ENERGY EQUIPMENT
Slide 33: Energy Equipment Summary
Energy Equipment Summary Dynamic energy landscape with varied trends across our product lines Competitive manufacturing and sourcing advantages give us foundation for growth Stage 1 priorities focused on margin improvement ― Extending continuous improvement program from Wind Towers to rest of
Slide 34: Energy Equipment Segment Overview
Energy Equipment Segment Overview Products Key figures Revenue (LTM 6/30/18) by product type ($M) Storage tanks and other WIND TOWERS UTILITY STRUCTURES $785M 200 Revenue (25%) Storage 585 12% (75%) Adjusted EBITDA RESIDENTIAL/COMMERCIAL/ INDUSTRIAL SCALE & FIELD Margin AGRICULTURAL ERECTED STORAGE
Slide 35: Energy Equipment Segment Overview
Energy Equipment Segment Overview Wind towers Utility structures Storage tanks Footprint 4 manufacturing plants 6 manufacturing plants 3 manufacturing locations currently producing wind currently producing utility producing energy storage towers in US and Mexico structures in US and Mexico pro
Slide 36: Energy Equipment Competitive Advantages
Energy Equipment Competitive Advantages Our energy equipment businesses have competitive advantages that position us well to take advantage of the dynamic market Low cost manufacturing Premier steel sourcing platform in the US and capabilities Mexico Manufacturing flexibility Engineering expertise a
Slide 37: Dynamic energy landscape with varied trends across our product lines
Dynamic energy landscape with varied trends across our product lines Renewable power Abundance of Fundamentals of Long term generation growth low-cost natural the power potential of new expected to remain gas in the transmission technologies to strong in the US changing industry remain shift the cur
Slide 38: Wind Power Market Outlook
Wind Power Market Outlook Wind power is already competitive in the regions that we serve Wind is projected to be competitive on an …resulting in a market driven business model unsubsidized basis in 22 states by 2022 … Industry forecasts show drop in wind power installations in 2021, as the 2015 ex
Slide 39: Storage Tank Market Outlook
Storage Tank Market Outlook Storage tanks serve a diverse group of markets, with higher growth potential in industrial and field-erected storage RESIDENTIAL / MOBILE STORAGE AND INDUSTRIAL-SCALE COMMERCIAL / FIELD-ERECTED STORAGE TRANSPORTATION STORAGE AGRICULTURAL STORAGE Aboveground and Storage
Slide 40: Utility Structures Overview
Utility Structures Overview Our broad product portfolio and experienced engineering team enable us to meet a wide variety of customer needs Engineered Poles Light duty poles Lattice towers Substation (pre-engineered) structures Customized tubular Tubular steel Structures used for Tapered tubular ste
Slide 41: Utility Structures Market Outlook
Utility Structures Market Outlook Fundamentals of the power transmission industry remain positive Reliability, renewables, and reducing congestion …and industry forecasts point towards continue to drive transmission investment… robust spending in the next several years Primary Drivers for New Transm
Slide 42: Continuous Improvement Program
Continuous Improvement Program We are expanding our lean successes from Wind Towers to the rest of Energy Equipment to improve performance …and we are expanding the We implemented our continuous improvement …the program has produced solid program to the rest of Energy program in Wind Towers in 2013…
Slide 43: Strategic Focus for Energy Equipment
Strategic Focus for Energy Equipment Margin growth through Pursue organic growth and Continuous Improvement bolt-on acquisition initiatives opportunities Maintain manufacturing flexibility to address future Monitor opportunities for market dynamics and US offshore wind market product expansion ENERG
Slide 44: Summary
Summary Improve Energy Equipment Our competitive advantages provide foundation for long term growth Stage 1 plans already in process to improve margins Dynamic energy landscape generates opportunities for disciplined organic and acquisition growth 44 / Moving Infrastructure Forward — Investor
Slide 45: Transportation Products
ARCOSA TRANSPORTATION PRODUCTS
Slide 46: Transportation Products Summary
Transportation Products Summary Market leadership in barge and rail markets that are critical to infrastructure Businesses with competitive advantages that produce healthy cash flow and deliver strong returns Barge recovery to provide growth in the near term Additional growth opportunities b
Slide 47: Transportation Products Segment
Transportation Products Segment Established brands and products primed for growth as transportation markets recover PRODUCTS KEY FIGURES REVENUE (LTM 6/30/18) by product type ($M) $353M Barges TANK BARGES HOPPER BARGES FIBERGLASS Revenue COVERS 136 16% (38%) Adjusted EBITDA 217 RAILCAR INDUSTRIAL &
Slide 48: Transportation Products Operating Overview
Transportation Products Operating Overview COMPONENTS BARGES Footprint 4 manufacturing facilities along the inland river 3 manufacturing facilities in the United States system, plus additional barge cover facilities Value A leading manufacturer of steel components for rail Industry-leading i
Slide 49: Components Overview
Components Overview Arcosa’s components businesses are market leaders with well-established products and reputations CASTINGS FORGINGS Brands McConway & Torley Primary Railcar couplers Axles for freight, tank, Products and related products and passenger railcars Industrial and Crane wheels m
Slide 50: Components Competitive Advantages
Components Competitive Advantages Our components businesses have unique capabilities to deliver value to customers Modernized Specialized intellectual foundries in U.S. property Capacity to serve rail and Dedicated forging industrial markets through equipment cycles COMPONENTS Long term sales Global
Slide 51: Long term Sales Agreements with TrinityRail
Long term Sales Agreements with TrinityRail Agreements provide production visibility and time to grow new customer base Long term sales agreements with TrinityRail provide production visibility and time to grow new customer base Agreements with TrinityRail have an annual market pricing mechanism
Slide 52: Barge Overview
Barge Overview Arcosa is an industry leader in barge manufacturing, fiberglass barge covers, and marine hardware Marine Hardware and Tank barges Hopper barges Primary Fiberglass covers Products Hatches Winches Castings Fiberglass barge covers Refined products Food and farm products New
Slide 53: Barge Market Overview
Barge Market Overview The inland waterway system is a critical part of the country’s infrastructure 14% of all domestic freight moves on the inland waterway system Portland Waterways transport: Minneapolis Buffalo Chicago Pittsburgh New York City ‒ ~60% of the nation’s grain exports ‒ ~22% of do
Slide 54: Barge Market Overview
Barge Market Overview Inland barges serve a diverse set of commodity markets Dry cargo transported by inland barge, Liquid cargo transported by inland barge, by commodity (%) by commodity (%) Agricultural Petrochemicals Iron / Ores / Scrap Manufactured 1% and Chemicals Goods / Other 4% 22% 11% Coal
Slide 55: Barge Competitive Advantages
Barge Competitive Advantages Our barge business has a number of competitive advantages that help generate strong cash flow and returns on capital Industry-leading Premier steel sourcing manufacturing capacity capabilities Flexibility to shift between Longstanding relationships barge types with leadi
Slide 56: Barge Overview
Barge Overview Since 2010, our barge business has averaged ~$470M in revenue; even in the downturn, operating profit has been positive Inland Barge business Revenue 675 Adjusted EBITDA $ Millions 653 639 577 548 • Healthy returns on capital over the cycle, as Adj. EBITDA / Assets 422 403 averaged 62
Slide 57: Barge Market Outlook
Barge Market Outlook Orders in the first half of 2018 have been strong, leading to expectations of significantly improved 2019 Inland Barge business Book to Bill ratio ($ Value of Orders Signed: $ Value of Orders Produced) 2.7 3 out of last 4 quarters have had 2.3 book to bill ratio significantly
Slide 58: Summary
Expand Summary Transportation Products Leadership positions in products critical to transportation infrastructure Flexible manufacturing capacity to shift rapidly to changes in demand and earn profits even in major downturns Stage 1 priorities underway ― Growth plan to re-open idle barge facil
Slide 59: Agenda
Agenda Company overview and strategic roadmap Business segment highlights Financial overview and capital allocation strategy Leadership team 59 / Moving Infrastructure Forward — Investor Presentation, October 2018
Slide 60: Financial overview
Financial overview Key messages Higher Liquidity and Disciplined Lean revenue and balance sheet capital operating EBITDA capacity to allocation model, with expected in fund growth process focus on 2019 improving ROIC 60 / Moving Infrastructure Forward — Investor Presentation, October 2018
Slide 61: 2019 Guidance
2019 Guidance Transportation Products Energy Equipment Overall EBITDA expected to be higher in 2019 than 2018, Construction Products driven by barge recovery and operating improvements Corporate/ Other Revenue ($M’s) EBITDA ($M’s) 2,140 1,550- 1,704 1,650 1,462 377 1,421 263 196 180-195 182 2015 201
Slide 62: 2019 Guidance
2019 Guidance We expect EBITDA of $180-195M in 2019 Positives from 2018 Challenges from 2018 Barge recovery expected to result in higher $10-15M of incremental public company costs revenue and operating margin (will be in corporate costs) Energy Equipment improvements ― Planned exit of certain
Slide 63: Liquidity and balance sheet capacity to pursue growth
Liquidity and balance sheet capacity to pursue growth Strong Available ~$200M of cash expected at separation Liquidity No material outstanding debt anticipated at time of separation Position Unencumbered balance sheet 5-Year $400M five-year credit facility expected Credit Facility Lender g
Slide 64: Long Term Capital Structure
Long Term Capital Structure Over the long term, Arcosa expects to operate with net leverage in the 2.0x – 2.5x range, consistent with our industrial peers Industrial peers net leverage Net debt / LTM EBITDA 4.2x 3.8x 3.3x 3.0x 3.0x * 2.8x 2.7x 2.5x Median: 2.3x 2.4x * 2.1x 1.7x 1.5x 1.5x 1.2x 0.8x *
Slide 65: Capital Allocation Priorities
Capital Allocation Priorities Balanced capital allocation strategy across organic investments and acquisitions Organic investments Acquisitions Return of capital to shareholders Balance between growth and Invest in acquisitions that will: Anticipate paying quarterly maintenance investments ― E
Slide 66: Capital Allocation Priorities
Capital Allocation Priorities How we assess potential acquisitions Profitability Market Strategic alignment Market growth potential Culture and capabilities & returns dynamics Fit with broader Exposure to fast- Attractive returns on Market dynamics Cultural potential to strategy of growing
Slide 67: Focus on improving ROIC
Focus on improving ROIC Cash generation has been healthy; focus is on improving ROIC Net cash from operating activities ($M’s) Pre-Tax Return on Invested Capital 293 15.7% 14.6% 228 162 168 9.5% 8.4% 2015 2016 2017 LTM 2015 2016 2017 LTM 6/30/18 6/30/18 Capital Expenditures ($M’s) Working capital as
Slide 68: Lean operating model
Lean operating model Actions are underway to reduce layers and make costs more variable Guiding principles Corporate actions taken prior to spin Reduce layers to expedite decision making Outsourced certain corporate functions, and enhance connections with customers where appropriate and other st
Slide 69: As a leadership team, we are committed to building a culture of trust
As a leadership team, we are committed to building a culture of trust with our investors, analysts, and other stakeholders Credibility Accessibility Transparency 69 / Moving Infrastructure Forward — Investor Presentation, October 2018
Slide 70: Agenda
Agenda Company overview and strategic roadmap Business segment highlights Financial overview and capital allocation strategy Leadership team 70 / Moving Infrastructure Forward — Investor Presentation, October 2018
Slide 71: Environmental, social, and governance impact
Environmental, social, and governance impact Our board and leadership team are committed to ESG impact Safety and health Environment People & communities Governance Protecting the safety and We are stewards of Our people contribute to We are committed to the health of our people the environment and
Slide 72: Management team
Management team Experienced leadership team with renewed focus on growth Antonio Carrillo Scott Beasley Reid Essl Kerry Cole Jess Collins President & CEO Chief Financial Officer Construction Products Energy Equipment Transportation Products Kathryn Collins Bryan Stevenson Mary Henderson Gail Peck Ch
Slide 73: Board of directors
Board of directors Board Members bring diverse expertise and leadership experience Rhys Best, Non-Executive Antonio Carrillo John Lindsay Chairman of Arcosa • Current Director of Trinity • President and CEO of Helmerich • Current Director of Trinity & Payne, Inc. • Future President and CEO of • Non-
Slide 74: Appendix
Appendix
Slide 75: Leadership bios
Leadership bios Antonio Carrillo President & CEO Antonio has extensive experience in the industrial, energy, transportation and construction sectors in the U.S and internationally. Most recently, he was Chief Executive Officer of Mexichem, (BMV:MEXCHEM) , where he led its transformation into a $6 bi
Slide 76: Leadership bios
Leadership bios Scott Beasley Reid Essl Chief Financial Officer Construction Products Scott Beasley is the Chief Financial Officer at Reid Essl is the President of Construction Arcosa, Inc. Products at Arcosa, Inc. Scott joined Trinity Industries in 2014. He served as From 2016 to 2018, Reid served
Slide 77: Leadership bios
Leadership bios Kerry Cole Jess Collins Energy Equipment Transportation Products Kerry Cole is the President of Energy Equipment at Jess Collins is the President of Transportation Products Arcosa, Inc. at Arcosa, Inc. Prior to this role, Kerry joined Trinity Industries in 2000. Prior to this role, J
Slide 78: Leadership bios
Leadership bios Kathryn Collins Bryan Stevenson Chief HR Officer Chief Legal Officer Kathryn A. Collins is the Chief Human Resources Officer Bryan P. Stevenson is the Chief Legal Officer at Arcosa, at Arcosa, Inc. Inc. Prior to this role, Kathryn served as the Vice President of Prior to this role, B
Slide 79: Leadership bios
Leadership bios Mary Henderson Gail Peck Chief Accounting Officer SVP, Finance & Treasurer Mary Henderson is the Chief Accounting Officer at Arcosa, Gail Peck is the Senior Vice President, Finance and Inc. Treasurer at Arcosa, Inc. Prior to this role, Mary served as Vice President and Chief Prior to
Slide 80: EBITDA reconciliation: Arcosa
EBITDA reconciliation: Arcosa 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 Depreciation &
Slide 81: Adjusted EBITDA reconciliation by Arcosa Segment
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 E
Slide 82: Adjusted EBITDA reconciliation: Trinity's Historic Barge Segment
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 $
Slide 83: Investor Presentation
Investor Presentation October 2018