Table of Contents

As filed with the Securities and Exchange Commission on May 6, 2019

Registration No. 333-230673

 

 

 


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


Amendment No. 2

to

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 


Concrete Pumping Holdings, Inc.

(Exact name of registrant as specified in its charter)

 


Delaware

1700

83-1779605

     

(State or other jurisdiction of
incorporation or organization)

(Primary Standard Industrial
Classification Code Number)

(I.R.S. Employer
Identification Number)

 

6461 Downing Street

Denver, Colorado 80229

(303) 289-7497

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 


Iain Humphries

Chief Financial Officer and Secretary

Concrete Pumping Holdings, Inc.

6461 Downing Street

Denver, Colorado 80229

(303) 289-7497

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 


Copies to:

 

Elliott M. Smith
Winston & Strawn LLP
200 Park Avenue
New York, New
York 10166
Tel: (212) 294-6700

Fax: (212) 294-4700

Paul D. Tropp

Ropes & Gray LLP
1211 Avenue of the Americas
New York, New York 10036

Telephone: (212) 596-9000

Fax: (212) 596-9090

   

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 7(a)(2)(B) of the Securities Act. ☐

 

 

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of

Securities to be Registered

 

Proposed Maximum Aggregate

Offering Price

 

 

Amount of

Registration

Fee

 

Shares of Common stock offered by the Company, par value $0.0001 per share

 

 

$105,000,000(1)

 

 

 

$12,726(2)

 

 

(1)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)

Previously paid.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. 

 

 

 

 
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION DATED MAY 6, 2019

 

PRELIMINARY PROSPECTUS

 

 

CONCRETE PUMPING HOLDINGS, INC.

15,000,000 Shares of Common Stock

 

We are offering 15,000,000 shares of our common stock, par value $0.0001 per share (“common stock”).

 

Our common stock is listed on The Nasdaq Capital Market (“Nasdaq”) under the symbol “BBCP.” The last reported sales price of our common stock on Nasdaq on May 3, 2019 was $6.54 per share.

 

We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and are subject to reduced public company reporting requirements. This prospectus complies with the requirements that apply to an issuer that is an emerging growth company.

 

Investing in our common stock involves risks. See Risk Factors included on page 16 in this prospectus.

 

   

Per Share

   

Total

 

Public offering price

  $       $    

Underwriters discount(1)

  $       $    

Proceeds to us (before expenses)

  $       $    

 

(1)

See “Underwriting” for additional information regarding underwriting compensation.

 

We have granted the underwriters an option to purchase up to an additional 2,250,000 shares of common stock from us at the public offering price, less underwriting discounts, within 30 days of the date of this prospectus.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this prospectus or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The underwriters expect to deliver the shares of common stock to investors on or about             , 2019.

______________________

 

Joint Bookrunning Managers

UBS Investment Bank

Baird

Stifel

William Blair

 

______________________

 

The date of this prospectus is              , 2019.

 

 

Table of Contents

 

TABLE OF CONTENTS

 

Page

 

Cautionary Note Regarding Forward-Looking Statements

1

Summary

2

The Offering

11

Summary Consolidated Financial Information

12

Summary Unaudited Pro Forma Condensed Combined Financial Information

15

Risk Factors

16

Use Of Proceeds

34

Ticker Symbol Information

35

Dividends

35

Capitalization

36

Dilution

38

Management’s Discussion And Analysis Of Financial Condition And Results Of Operations Of The Company

39

Management’s Discussion And Analysis Of Financial Condition And Results Of Operations Of The Capital Companies

65

Business Of CPH And Certain Information About CPH

66

The Proposed Capital Acquisition

77

Unaudited Pro Forma Condensed Combined Financial Statements

79

Management

92

Executive Compensation

99

Certain Relationships And Related Transactions

106

Security Ownership of Certain Beneficial Owners and Management

110

Description Of Capital Stock

112

Material U.S. Federal Income Tax Consequences To  Non-U.S. Holders Of Our Common Stock

119

Underwriting

123

Legal Matters

128

Experts

128

Where You Can Find More Information

128

Index To Financial Statements

F-1

_____________________

 

We are responsible for the information contained in this prospectus. We have not authorized anyone to provide you with different information, and we take no responsibility for any other information others may give you. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than its date.

 

 

Table of Contents

 

Cautionary Note Regarding Forward-Looking Statements

 

This prospectus contains forward-looking statements. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. Specifically, forward-looking statements may include statements relating to:

 

 

the consummation of the Capital Acquisition (as defined below) and the benefits of the Business Combination (as defined below) and the Capital Acquisition;

 

 

our future financial performance following the Business Combination and the Capital Acquisition;

     
 

this offering and the planned debt financing in connection with the Capital Acquisition;

     
 

our business strategy;

     
 

changes in the market for our products;

     
 

expansion plans and opportunities; and

     
 

other statements preceded by, followed by or that include the words “may,” “can,” “should,” “will,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.

 

You should not place undue reliance on these forward-looking statements in deciding whether to invest in our securities. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

 

 

the risk that the Capital Acquisition disrupts current plans and operations;

 

 

the ability to recognize the anticipated benefits and synergies of the Business Combination and the Capital Acquisition, which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably;

 

 

costs related to the Capital Acquisition and the subsequent integration of Capital Pumping (as defined below);

 

 

our ability to finance the Capital Acquisition as planned, including our ability to consummate this offering and the debt financing as planned;

 

 

changes in applicable laws or regulations;

 

 

fluctuations in the U.S. and/or global stock markets;

 

 

the possibility that we may be adversely affected by other economic, business, and/or competitive factors; and

 

 

other risks and uncertainties described in this prospectus under “Risk Factors.”

 

Such risks and uncertainties also include those set forth under “Risk Factors” herein. Our forward-looking statements speak only as of the time that they are made and do not necessarily reflect our outlook at any other point in time, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

1

Table of Contents

Summary

 

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our securities, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes included in this prospectus and the information set forth under the headings Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations of the Company. Unless the context indicates otherwise, the terms Company, we, us and our refer to Concrete Pumping Holdings, Inc. (formerly known as Concrete Pumping Holdings Acquisition Corp.) and its subsidiaries, and successor entity to Industrea Acquisition Corp., which we refer to as Industrea.

 

Our Company

 

Business Overview and History

 

Concrete Pumping Holdings, Inc. (“we” or the “Company”) is a leading provider of concrete pumping services and concrete waste management services in the U.S. and U.K. based on fleet size, operating under what we believe are the only established national brands in both geographies – Brundage-Bone Concrete Pumping, Inc. (“Brundage-Bone”) for concrete pumping and Eco-Pan, Inc. (“Eco-Pan”) for waste management services in the U.S. and Camfaud Group Limited (“Camfaud”) in the U.K. Concrete pumping is a highly specialized method of concrete placement that requires skilled operators to position a truck-mounted, fully-articulating boom for precise delivery of ready-mix concrete from mixer trucks to placing crews on a construction job site. In addition, proper concrete washout handling has become an increasing area of focus, with rising awareness of environmental factors. Our large fleet of specialized pumping equipment, washout pans and trucks, and highly-trained operators enable us to be the trusted provider of concrete placement and waste management solutions to our customers. We deliver and facilitate substantial labor cost savings, shortened concrete placement times, enhanced worksite safety, and efficient concrete washout containment, and thereby help improve the overall quality of construction projects. As of January 31, 2019, we operated a fleet of 951 units of equipment, with 673 experienced employees and 121 locations globally.

 

As we believe we are the only nationally-scaled provider of concrete pumping in the U.S. and U.K. with over 35-years of experience, we believe we have the most comprehensive fleet and highly-skilled operators and are especially equipped to support large and technically complex construction projects, which generally command higher price points relative to smaller projects. In addition, we have actively focused the business on commercial and infrastructure construction projects, while continuing to service profitable residential opportunities. Our fleet is capable of handling multiple large projects concurrently, and can be deployed on short-notice across the U.S. and the U.K., thereby allowing us to nimbly allocate resources depending on market conditions to more profitable markets. Our highly complementary Eco-Pan business provides customers with a one-stop solution for their concrete washout needs. We plan to continue establishing additional Eco-Pan locations across the U.S., and further deepen penetration of Eco-Pan services within our existing concrete pumping customer base through cross-selling.

 

The Brundage-Bone business was founded in 1983 in Denver, Colorado. Since then, Brundage-Bone has expanded across the U.S. through more than 45 acquisitions. In November 2016, we entered the U.K. through the acquisition of Camfaud. Today, based on fleet size, we estimate we have an approximate 10% share in the U.S. and an approximate 34% share in the U.K. On a global basis, we serve a large and diverse base of more than 8,000 customers with low customer concentration.

 

On December 6, 2018, the Company, formerly known as Concrete Pumping Holdings Acquisition Corp., consummated the previously announced business combination transaction (the “Business Combination”) pursuant to which it acquired (i) the private operating company formerly called Concrete Pumping Holdings, Inc. and (ii) the former special purpose acquisition company, Industrea. In connection with the closing of the Business Combination, the Company changed its name to Concrete Pumping Holdings, Inc.

 

The Company’s financial results are separated into two distinct periods: (1) up to and including the Business Combination closing date (labeled “Predecessor”) and (2) the period after that date (labeled “Successor”). The period presented from December 6, 2018 through January 31, 2019 is the “Successor” period. The periods presented from November 1, 2018 through December 5, 2018 and November 1, 2017 through January 31, 2018 are the “Predecessor” periods. The Predecessor and Successor periods reflect the application of different bases of accounting as a result of the Business Combination, and are therefore not comparable.

 

The historical financial information of Industrea (a special purpose acquisition company, or SPAC) prior to the Business Combination has not been reflected in the Predecessor financial statements as these historical amounts have been determined to be not useful information to a user of the financial statements. SPACs deposit the proceeds from their initial public offerings into a segregated trust account until a business combination occurs, where such funds are then used to either pay consideration for the acquiree or stockholders who elect to redeem their shares of common stock in connection with the business combination. SPACs will operate until the closing of a business combination, and the SPAC’s operations until the closing of a business combination, other than income from the trust account investments and transaction expenses, are nominal. Accordingly, no other activity in the Company was reported for periods prior to December 6, 2018 besides CPH’s operations as Predecessor. 

 

The discussion below combines the results of operations for the Predecessor period from November 1, 2018 through December 5, 2018, and the Successor period from December 6, 2018 through January 31, 2019, and is discussed as the fiscal quarter ended January 31, 2019 when comparing to the fiscal quarter ended January 31, 2018. As noted above, the Predecessor and Successor periods reflect the application of a different basis of accounting as a result of the Business Combination, and as such, the results for the fiscal quarter ended January 31, 2019 are non-GAAP. Management believes combining the Predecessor and Successor periods for the three months ended January 31, 2019 when reviewing the operating results is more useful in discussing the overall operating performance when compared to the same period in the prior year. Accordingly, the discussion below only includes the non-GAAP results for the three-months ended January 31, 2019.

 

For the fiscal year ended October 31, 2018, our revenue grew 15% to $243.2 million from $211.2 million in fiscal year ended October 31, 2017. For fiscal quarter ended January 31, 2019, our revenue grew 11% to $58.4 million from $52.8 million in fiscal quarter ended January 31, 2018. Our revenue pro forma for acquisitions, excluding any revenue from the Capital Acquisition, for fiscal year ended October 31, 2018 and fiscal quarter ended January 31, 2019 was $250.2 million and $58.4 million, respectively (see the Company’s consolidated financial statements and the related notes appearing elsewhere in this prospectus). Our net income for the fiscal year ended October 31, 2018 was $28.4 million. For the fiscal quarter ended January 31, 2019, our net loss was $26.2 million, which was primarily driven by the Business Combination, including an increase in transaction costs of $14.2 million and an increase in debt extinguishment costs of $16.4 million.

2

Table of Contents

Recent Developments

 

On March 18, 2019, we entered into a definitive agreement to acquire the Capital Companies (as defined herein) in an all-cash transaction (the “Capital Acquisition”). The purchase agreement was unanimously approved by our board of directors (the “Board”) and is expected to close promptly following the closing of this offering, subject to regulatory approvals and other customary closing conditions. We expect the Capital Acquisition to enhance our positioning and scale in the concrete pumping industry, specifically within the Texas market. We believe the increased scale will provide us and our customers with several advantages including expanded breadth of services and fleet availability and a platform for us to become the employer of choice in the industry. In addition, we expect to realize meaningful synergies from the transaction through operational efficiencies.

 

On March 26, 2019, the Federal Trade Commission granted termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) relating to the Capital Acquisition. The termination satisfies one of the conditions to completing the Capital Acquisition, which remains subject to other customary closing conditions and is expected to close promptly following this offering.

 

Combined revenue for the Capital Companies for the first fiscal quarter of 2019 increased 15% to $14.0 million due to continued strong demand in the Texas region. Net income for the first quarter of 2019 increased 23% to $4.2 million. Adjusted EBITDA1 for the first quarter of 2019 increased 25% to $7.0 million, with Adjusted EBITDA margin up approximately 420 basis points to 50%.

 

For the twelve months ended March 31, 2019, combined revenue for the Capital Companies increased 4% to $51.3 million compared to $49.5 million in fiscal year 2018. Adjusted EBITDA1 increased 6% to $24.2 million compared to $22.8 million in fiscal year 2018. Adjusted EBITDA margin was 47% for the twelve months ended March 31, 2019, compared to 46% in fiscal year 2018.

 

Based on the Capital Companies’ Adjusted EBITDAfor the twelve months ended March 31, 2019, the purchase price values the Capital Companies at an Adjusted EBITDA multiple of 5.3x before synergies, an improvement from 5.7x when utilizing the Capital Companies’ combined full year 2018 Adjusted EBITDA1.

 

The Capital Acquisition provides compelling opportunities for us to grow our scale and diversity as well as enhance our financial profile. Such opportunities include:

 

 

Increasing efficiencies of scale in Texas, which is highly fragmented;

 

 

Strategically expanding presence in the high-growth Texas market;

 

 

Providing a larger customer base to expand the Eco-Pan business;

 

 

Adding a highly complementary business and what we believe is the youngest fleet of scale in the industry; and 

 

 

Providing compelling Adjusted EBITDA1, tax, capital expenditure and real estate synergies.

 

We intend to use the net proceeds from the expected sale of shares of our common stock offered pursuant to this prospectus to finance a portion of the purchase of the Capital Companies from its current owners.

 

For more information on the Capital Companies, please refer to the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Capital Companies” and the consolidated financial statements of the Capital Companies and the related notes appearing elsewhere in this prospectus. In addition, please refer to the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements” for unaudited statements on the combined company on a pro forma basis giving effect to this offering, the Business Combination, the Capital Acquisition and the related debt financing.

 

On March 26, 2019, the Company and certain of its affiliates entered into an Amendment No. 1 to Term Loan Agreement, with Stifel Bank & Trust (“Stifel”) and Credit Suisse AG, Cayman Islands Branch (the “Administrative Agent”), pursuant to which Stifel and certain other lenders agreed to provide, subject to satisfaction of customary closing conditions, including the closing of the Capital Acquisition, incremental term loans in an aggregate amount up to $40 million (the “Amendment No. 1 Term Loans”), which shall be borrowed under, and have substantially the same terms as the term loans previously borrowed under, the Term Loan Agreement, dated as of December 6, 2018, by and among the Company, certain of its affiliates, the Administrative Agent and each lender party thereto from time to time, for the purpose of financing a portion of the consideration payable in connection with the Capital Acquisition and the fees and expenses in connection therewith and in connection with the Amendment No. 1 Term Loans. Concurrently with this offering, we may seek to incur additional debt to finance the Capital Acquisition.

 

On April 1, 2019, we commenced (i) an offer to each holder of our public warrants and private placement warrants that were issued in connection with Industrea’s initial public offering on April 17, 2017 (the “IPO”) the opportunity 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 placement warrant tendered pursuant to the offer (the “Offer” or “Warrant Exchange”), and (ii) the solicitation of consents (the “Consent Solicitation”) from holders of the public warrants to amend the Warrant Agreement, dated as of July 26, 2017, by and between the Company and Continental Stock Transfer & Trust Company, which governs all of the warrants, to permit us to require that each warrant that is outstanding upon the closing of the Offer be converted into 0.1895 shares of common stock. The Offer and Consent Solicitation expired at 11:59 p.m., Eastern Daylight Time, on April 26, 2019. 9,982,123 public warrants and 11,100,000 private placement warrants were tendered for exchange pursuant to the Offer and Consent Solicitation. On April 29, 2019, we issued 2,101,213 shares of common stock in exchange for the tendered public warrants and 1,707,175 shares of common stock in exchange for the tendered private placement warrants. Because consents were not received from holders of more than 65% of the public warrants, the Warrant Agreement amendment was not approved and the Warrant Agreement will remain unchanged. As a result, the Company has 40,214,153 shares of common stock and 13,017,777 public warrants outstanding as of the date of this prospectus.

 

On April 15, 2019, the Company acquired Atlas Concrete Pumping Inc. (“Atlas”), a provider of concrete pumping services in Idaho, for a purchase price of approximately $3.8 million, payable in cash and common stock. Atlas has a roughly 60/40 commercial to residential split and a fleet of nine pumps.

 

Additionally, during the month of April 2019, CPH’s management exercised 57% of the rollover incentive options received in the business combination with Industrea Acquisition Corp. in December 2018, representing an incremental $1.4 million cash investment in the Company.

 


1 Adjusted EBITDA is a financial measure that is not calculated in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”). See “Non-GAAP Financial Measures” in the “Management’s Discussion And Analysis Of Financial Condition And Results Of Operations Of The Capital Companies” section below for a discussion of Adjusted EBITDA and a reconciliation to net income. 
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Table of Contents

 

Business Segments

 

Our reportable segments are summarized below:

 

U.S. Concrete Pumping — Brundage-Bone: We provide concrete pumping services in the U.S. with a fleet of 587 equipment units from a diversified footprint of 80 locations across 22 states as of January 31, 2019 and operate under the brand Brundage-Bone. Brundage-Bone is the only brand in the U.S. with a multi-regional footprint in a fragmented industry. We provide operated concrete pumping services, for which we bill customers on a negotiated time and volume basis based on the duration of the job and yards of concrete pumped. Additional charges (such as a fuel surcharge and travel costs) are frequently added based on specific project requirements. Typically, we send a single operator with each concrete pump. We do not take ownership of the concrete and thus have minimal inventory or product liability risk. We typically do not engage in fixed-bid work or have surety bonding requirements and operate a daily fee-based revenue model regardless of overall construction project completion.

 

U.K. Concrete Pumping — Camfaud: We operate our business in the U.K. under the Camfaud brand name. Camfaud operates both a fixed and a mobile fleet. The fixed fleet business entails either (1) utilizing static line pumps with an accompanied operator, or (2) renting out equipment on a long-term basis without an operator. Mobile equipment is charged to customers under a minimum hire rate, which is typically five to eight hours. Our concrete pumping business in the U.K. is comprised of a fleet of 364 equipment units that are serviced from 28 locations as of January 31, 2019. Our acquisition of Reilly Concrete Pumping in 2017 further expanded the Company’s footprint across the U.K., allowing us to provide our diverse customer base with a truly national service offering on major infrastructure and commercial projects.

 

Concrete Waste Management Services — Eco-Pan: Through our Eco-Pan business, we are a leading provider of concrete waste management services in the U.S. Eco-Pan provides a full-service, cost effective, regulatory-compliant solution to manage environmental issues caused by concrete washout. Eco-Pan is a route-based solution that operates 61 trucks and more than 5,400 custom metal pans for construction sites from 14 locations in the U.S. as of January 31, 2019. We charge a round-trip delivery fee and weekly or monthly rental rate for the pans, which provide a turnkey solution to the customer compared to the alternatives of bagging the waste concrete, pouring it into an on-site lined pit, or disposing of it into trash dumpsters and arranging for a pick-up. Eco-Pan delivers watertight pans to job sites to collect concrete washwater, and subsequently deliver it to recycling centers. Disposal fees charged by the recycling centers are passed on to the customer. To the extent that the pans are held at the job site for an extended number of days or irregular waste is found in the pan, we charge incremental fees. Our trucks are designed to allow for the pick-up and re-delivery of multiple pans, leading to significant incremental efficiencies as route densities increase.

 

Equipment

 

As we believe we are the only national provider of concrete pumping in the U.S. and the U.K. with over 35-years of experience, we believe we have the most comprehensive fleet and highly-skilled operators to provide quality services and we are especially suited to support large and technically complex construction projects.

 

Our fleet is operated by approximately 673 experienced employees as of January 31, 2019, each of whom is required to complete rigorous training and safety programs. As of January 31, 2019, our fleet consisted of 624 boom pumps, ranging in size from 17 to 65 meters, 57 placing booms, 16 telebelts and 254 stationary pumps and other specialized concrete placing equipment (951 pieces of equipment in total).

 

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Concrete Pumping Equipment Fleet

Boom Pumps

 

Stationary Pumps

 

Mobile, truck-mounted boom pumps with
vertical reach over 200 feet

 

Capable of handling high psi and long distance pumping up to 1,000 feet vertically or 4,000 feet horizontally

Placing Booms

 

Telebelts

 

Typically are used for high-rise projects and can be mounted upon a self-rising mount or base

 

Ideal for maneuvering concrete and construction material around a variety of job sites

 

Industry Overview

 

Concrete Pumping Overview

 

There are two primary methods of placing concrete when direct pouring (“tail-gating”) is not an option: traditional methods (such as using wheelbarrows and cranes and buckets) and concrete pumping. Traditional methods are both labor-intensive and time-intensive, requiring loading materials into containers, hauling the containers to the appropriate location and subsequently returning the containers to the concrete mixer to be refilled. Concrete pumping, by contrast, provides a safer, more cost-effective and time-efficient placement solution, in which concrete is continuously pressure pumped through a boom and hose directly to the specified area. Except where direct pouring is feasible (such as for highways and level sites where a ready-mix truck can be parked within approximately 15 feet of the concrete installation), concrete pumping continues to be the method of choice over traditional placement methods, as it lowers construction costs, shortens job times, allows for better access to challenging pour locations and enhances worksite safety. Our concrete pumps can empty a ready-mix concrete truck in as little as four minutes and have the technical capability of being able to place concrete at distances of up to 1,000 feet vertically and 4,000 feet horizontally. By contrast, traditional methods such as using wheelbarrows are more labor and time-intensive with up to 200 wheelbarrow loads required to empty a ready-mix truck. Given this ability, concrete pumping is the placement method of choice for technical jobs especially when concrete must be placed in hard-to-reach areas, including multi-story commercial and residential projects as well as infrastructure projects such as tunnels and bridges.

 

We estimate concrete pumping represents 34% of total concrete placed in both the U.S. and U.K. This level of U.S. penetration is up from approximately 20% in 2000, but still meaningfully below estimated penetration levels of Continental Europe and the Middle East. We expect the share of concrete pumping to grow over the next decade particularly in the U.S., driven by several factors such as increasing commercial construction activity in space-constrained urban areas (meaning less access for concrete trucks), residential developers building houses closer together to meet growing housing demand, ongoing urbanization, rising construction costs due to robust industry demand for skilled labor (which benefits concrete pumping given it is less labor-intensive than traditional concrete placement methods), and an increasing focus on worksite safety.

 

Concrete Waste Management Services Overview

 

After concrete is used at a construction site, the ready-mix trucks, concrete pump trucks and other equipment must be washed out to remove the remaining concrete before it hardens. Concrete washout water (or “washwater”) is a slurry that contains toxic metals, is highly caustic and corrosive and contains elevated pH levels near 12 (compared to water at 7). Washwater can be harmful for wildlife, inhibit plant growth and contaminate groundwater. If not properly disposed of, washwater can percolate down through the soil, altering soil chemistry, and run off the construction site to adjoining roadside storm drains that discharge to rivers, lakes, or inlets. The U.S. Environmental Protection Agency (“EPA”) provides regulations for construction storm water management in the U.S. through the Clean Water Act and the Safe Drinking Water Act. As regulations and the density of construction projects continue to increase, we believe contractors and builders are looking for waste management service providers who can provide turnkey solutions to manage washout collection and disposal. Larger builders and contractors are typically earlier adopters of such solutions, which increases awareness among mid-tier and local contractors who see the solutions working on-site.

 

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Concrete washout management services allow contractors to outsource the management of concrete waste. In addition to regulatory considerations, washout management services enable contractors to more effectively allocate their workforce to higher priority activities on the job site, alleviating increasing labor costs which have hindered the construction industry. Washout management services, including Eco-Pan’s offering, currently collect an estimated 10-15% of concrete washout volume generated in the U.S. Alternative solutions include self-managed washout pits (an estimated 38% of the total according to management estimates), washout roll-off bins (an estimated 31% of the total according to management estimates), dumpsters, vinyl and hay bale pits, plastic pits, or no solution (e.g. illegal dumping). These alternatives are typically less mobile, messier, and are often not leak-proof.

 

Competitive Environment

 

The concrete pumping industry is highly fragmented. We believe there are approximately 1,000 industry participants in the United States, operating an average of less than ten pumps each, with few having a multi-regional presence and no other having a national presence. We believe many industry participants are undercapitalized, utilize aged equipment and operate only smaller and significantly fewer boom pumps. In a typical market, we compete with only one or two other concrete pumping companies that can perform the larger and more complex projects that we typically target.

 

We estimate that approximately 65-75% of the concrete pumping jobs in the U.S. are served by small, local providers and we are the largest multi-regional provider based on fleet size, providing services in approximately 22 states as of January 31, 2019. While we operate 472 boom pumps in the United States as of January 31, 2019, the average local operator has a fleet size of 5 to 10 pumps and regional operators have an average of 50-60 pumps each. Relative to the U.S., the U.K. has a higher proportion of regional players.

 

For our Eco-Pan business, we believe we are the only operator of scale with a national footprint. We compete with local operators who may have a small number of washout pans but are not capable of offering services across the U.S. While the technology underlying the washout pans is less sophisticated than that for a concrete pump, we believe having the route density that Eco-Pan has achieved is a differentiator in terms of profitability.

 

Competitive Strengths

 

Industry Leader with Strong Brand Portfolio and Reputation Built over 35 years

 

We believe we are the largest concrete pumping provider nationally in the U.S. and the U.K. as well as regionally in each of our operational geographies. We believe we have an approximate 10% share in the U.S. (according to management estimates) and approximate 34% share in the U.K. (according to management estimates). Few competitors have a multi-regional presence and most lack the breadth of equipment and national reach that allows us to provide differentiated, high quality services for our customers. Our leadership and scale also provides us a competitive advantage in the following areas:

 

 

Fleet Availability: Our large and diversified fleet (which includes specialty equipment such as placing booms and telebelts of different sizes) increases availability and provides contractors the assurance that we will have the equipment they require when they need it. We are also able to efficiently move equipment around the country to areas with the highest local demand, which helps maximize equipment utilization rates and extend useful life through dedicated, high quality onsite maintenance.

 

 

Purchasing: Our integrated sourcing platform enables us to purchase fuel, OE (original equipment) parts and components from suppliers at meaningful discounts relative to competitors. We are also able to negotiate discounts on insurance, thereby maintaining a more robust health, safety and environmental program.

 

 

Employer of Choice: Our scale allows us to invest into our highly skilled workforce, offering superior training and safety programs, as well as higher up-time due to relatively high utilization and mobility of our assets.

 

Compelling Customer Value Proposition

 

Despite only representing approximately 1-2% of overall project cost for medium and large jobs, concrete pumping is highly critical due to the perishable nature of concrete, which has only an approximate 90-minute life before hardening. Our concrete pumping equipment must arrive at the construction site before the ready-mix concrete trucks to prevent worksite delays and rejection of wet batches of concrete. A wasted batch of concrete is costly to the contractor, who often works under a fixed budget and tight timeline. These dynamics make customers relatively price-inelastic with regards to concrete pumping services.

 

Our regional structure, combined with analytical tools, provides visibility into the utilization and profitability of fleet nationwide, allowing us to respond proactively to local customer needs and trends as they develop. We help our customers avoid the potentially costly headaches associated with traditional methods of concrete placement while ensuring greater speed and efficiency, increased safety, enhanced consistency of the concrete pour and less labor intensity.

 

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Significant Industry Opportunity Supported by Favorable Secular Trends

 

We operate in an attractive industry environment with various commercial, environmental and legislative tailwinds. Outlook for concrete pumping spend continues to be positive driven by favorable trends in commercial, residential and infrastructure spending and increasing penetration of concrete pumping as a percentage of overall placement. Secular trends are pointing toward concrete pumping, as it represents a faster, safer and higher quality solution than alternative methods such as the use of wheelbarrows.

 

Within the U.S., concrete production is still approximately 22% below its prior peak according to management estimates and the lack of skilled labor in the construction industry has constrained capacity thereby extending the recovery of the sector. Additionally, the combination of the recently enacted tax reform, regulatory relief with respect to construction permits and increase in infrastructure spending as proposed by the current administration has provided further stimulus to our end markets. Similarly, the growth of concrete pumping in the U.K. is expected to be supported by various infrastructure programs including multiple phases of the recently announced $77 billion High-Speed Railway Project.

 

Diversified Platform Provides Cycle Resiliency

 

Our national geographic footprint, multiple service offerings, and exposure to three different end-markets provide significant operational diversity. This diversity is a key source of resiliency against volatile end market conditions. Our ability to deploy fleet in a flexible manner to meet fluctuations in demand across geographies allows us to pursue business in higher growth, more profitable markets with minimal friction costs. We believe we are well-positioned to benefit from states in the U.S. where growth in construction is expected to be at or above the national average in the near to medium term, such as Texas and California. Our service breadth across the commercial, residential and infrastructure end markets enables us to reduce cyclical volatility in revenues. The visibility of our potential revenue sources, especially for large scale projects, allows us to better manage fleet and pricing to mitigate the effects of potential market down cycles.

 

Deeply Entrenched and Long-Standing Customer Relationships

 

We are known for our reliability, customer service, national footprint and breadth of product offerings. These attributes, along with over 35 years of operational history, generate strong brand loyalty and thereby foster long-standing customer relationships, as evidenced by the fact that our top ten customers have been with the Company for an average tenure of more than 20 years. We execute a high-volume of small and mid-sized jobs across all end-markets that provide substantial and stable revenue with no customer concentration (top ten customers account for approximately 10% of revenues). We serve a base of more than 8,000 customers (often with several projects per customer) with an approximate 95% customer retention rate based on the top 500 customers, as of January 31, 2019. We believe customers value trusted relationships that can deliver services on-time, safely and efficiently. Any potential downtime caused by service disruptions often results in higher costs to our customers in terms of labor and materials. We have proven to be a dependable provider that customers turn to, especially for high difficulty or large scale, complex projects.

 

Optimized Fleet Mix to Cater to Varied Project Requirements

 

We maintain a disciplined approach to fleet management, remaining current on fleet repair and maintenance in order to maximize uptime of equipment, reliability and service levels for customers. We are able to dispose of older pumps as needed and retain best-maintained, highest-valued equipment. In addition, all of the repair and maintenance work is performed in-house through a staff of almost 100 mechanics so as to maximize fleet availability and performance levels. Our fleet mix consists of booms pumps ranging in size from 17 to 65 meters, appropriate for a range of project scope, height and conditions. Smaller operators tend to focus on shorter booms, and are therefore less capable of competing effectively for multi-story high-rise construction or complex infrastructure projects. Our ability to move fleet between branches depending on regional conditions is made possible by the high number of well-serviced equipment, which is managed to maximize flexibility while maintaining a conservative capital expenditure profile.

 

Significant Growth Opportunity from the Disruptive Eco-Pan Waste Management Solution

 

With EPA regulations and density of construction projects continuing to increase, contractors and builders are looking for turnkey solutions to better manage washout collection and disposal at sites. In such an environment, our proprietary Eco-Pan product has become the go-to-solution for customers to reduce the likelihood of environmental incidents and ensure compliance with all federal, state and local regulations. According to our estimates, Eco-Pan’s current penetration in the managed washwater solutions industry is only 3-4% within the U.S, which indicates significant runway for further penetration and cross-selling across our national customer footprint. The expansion of our Eco-Pan segment would also be financially accretive to our consolidated business profile given the attractive EBITDA margin profile and compelling unit economics. Furthermore, we also intend to expand Eco-Pan into the U.K. in the current fiscal year 2019, which represents an additional growth avenue for the Company.

 

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Strong Free Cash Flow Profile Bolstered by the Service Oriented Business Model

 

Our operating model is designed to generate strong profit margins and cash flow from operations. We are a construction services business that provides specialized equipment with highly-trained operators. The Company's equipment, on average, has a useful life of 10 to 25 years, which is significantly longer than the useful lives of most general construction equipment. In periods during which the fleet is less active, we incur lower labor, service and fuel costs, all of which are driven by the aggregate number of hours that we bill customers. We also maintain a highly variable cost structure (approximately 70% of our costs are variable), which enables us to better adapt to economic cycle fluctuations. Additionally, we are also able to generate significant cash through the sale of aged assets in the global secondary market for pumping equipment. All of these factors enhance the business's operational flexibility and its ability to generate operating cash flow throughout the business cycle.

 

Highly Successful Acquisition Strategy

 

Successful M&A transactions, executed at attractive multiples, have been the cornerstone of our historical growth strategy. As we believe we are the only national provider of concrete pumping, we are often the only bidder or exit opportunity for local family-owned firms and are therefore able to acquire companies at attractive valuations. Since 1983, we have executed over 45 acquisitions, which have significantly diversified and expanded our fleet, end-markets, service offerings and geographic reach. We also have a demonstrated track record of driving acquisition synergies through increasing utilization of acquired pumps, achieving higher revenue per hour due to greater pump availability and service levels, leveraging proprietary job costing tools, reducing purchasing and overhead costs, and capitalizing on cross selling opportunities with Eco-Pan.

 

Proven and Experienced Management Team

 

Our current management team is comprised of individuals with extensive operational, financial and managerial experience needed to effectively capitalize on the key opportunities in our business today and has been responsible for developing and executing our growth strategy. Our management team has a demonstrated track record of delivering growth via disciplined acquisitions and strategic growth initiatives, and we believe that we have a strong, deep bench of talented leaders who are well-positioned to continue driving the Company towards profitable growth and margin expansion.

 

 

Bruce Young (CEO) has led CPH in his current role for over 10 years; Mr. Young’s experience in concrete pumping dates back to 1980.

 

 

Iain Humphries (CFO) joined CPH in 2016; Mr. Humphries has over 20 years of experience in international finance and management leadership.

 

 

Tony Faud (Managing Director, U.K.) manages all of CPH’s U.K. operations and has over 30 years of concrete pumping experience.

 

Growth Strategy

 

We have built an integrated national platform that delivers quality solutions in response to customers’ complex construction needs. Our primary business objective is growing revenue and profitability by leveraging this platform while continuing to adhere to our core values of safety, people and reliability. We expect to continue executing on the following strategies to achieve these business objectives:

 

Capture Greater Share and Customer Wallet Share

 

Given our position as one of the industry leaders in the U.S. and the U.K., as well as regionally in each of our operational geographies, we believe there are significant opportunities to continue expanding our existing footprint and service offering, prioritizing larger and more complex projects, and further increasing customer wallet share.

 

 

Expand into New Geographies and Adjacent Services: Given our success in the U.K. following the acquisition of Camfaud in 2016, we are exploring opportunities to expand internationally into additional regions such as Australia, Canada, Continental Europe and the Middle East. Additionally, with Eco-Pan as a template for successfully entering a new service offering, we also intend to expand into attractive adjacent services to cross-sell across our existing customer base.

 

 

Prioritize Larger, More Complex Projects: Given our extensive equipment fleet and technical expertise, we will continue to pursue large and more complex commercial and infrastructure projects (high-rise buildings, tunnels, highway overpasses, water treatment facilities, wind farms and other industrial developments), which typically require higher volume of equipment for longer periods of time. As commercial and infrastructure spending continue to rebound, we are well-positioned to secure more of these larger scale assignments.

 

 

Increasing Customer Wallet Share: We believe our customers, many of whom are large contractors, are reducing the number of pumping providers with a preference for national players. Given our strong existing relationships with these customers, we are in a strong position to displace local competitors on other contracts and thereby capture a greater proportion of the wallet.

 

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Drive Pricing Optimization and Margin Expansion

 

Through our proprietary job-costing analytical tools, we have been able to develop a better understanding of profitability by customer, which allows us to optimally price jobs based on the underlying cost structure. While the majority of our jobs are based on purchase orders, some of the larger ones are under six to twelve month pricing agreements. As these arrangements come up for renewal, we will use our analytical tools to re-price work competitively to take advantage of improvements in underlying economic conditions.

 

We will continue to maintain a disciplined fleet management policy of remaining current on fleet repair and maintenance costs in order to maximize uptime, reliability and service levels for our customers. Our strategy is focused on balancing the mix of small versus large boom pumps, growing and enhancing the fleet size at a pace in line with revenue growth, and maintaining an appropriate fleet age.

 

Expand Eco-Pan across our Operating Footprint

 

Given the growing need for a turnkey solution to maintain EPA compliance and minimize the likelihood of environmental incidents, we believe that Eco-Pan has a strong revenue growth opportunity as we only have a small percentage of what we estimate is an $850 million market within the U.S. We believe that Eco-Pan is highly complementary to Brundage-Bone, as customers’ decision makers for purchasing concrete pumping services also typically handle the disposal of waste concrete. The business currently operates only in 12 of Brundage-Bones' core geographies, thereby providing significant upside opportunity from deploying the service across the remaining geographies. By leveraging the same footprint and customer base, we will be able to sell a bundled service that spans a greater portion of the construction project's lifecycle. The combination of the two businesses also presents an opportunity for creating additional cost-saving synergies, as both Brundage-Bone and Eco-Pan fleets can sometimes be co-located at the same facilities, serviced by a common set of mechanics, administered by the same office staff and marketed by the same salespeople. We strongly believe that our customers will value the service associated with the Eco-Pan product and the advantages it has over other incumbent alternatives, which are not spill-free or leak-proof.

 

Pursue Complementary Acquisitions

 

We intend to continue to strategically pursue and execute acquisitions to accelerate our growth strategies. Our end-markets are highly fragmented, providing numerous inorganic opportunities for us to expand our geographic reach and product capabilities. We maintain a disciplined approach to acquisitions and target strategic opportunities where we can realize meaningful synergies by leveraging our brand, operating culture, national reach and other core competencies. We specifically look for companies with strong management teams, a talented employee base, established customer relationships and well-maintained fleet of equipment. We constantly monitor our acquisition pipeline and have identified potential acquisitions, in addition to the Capital Acquisition, representing at least $100 million of adjusted EBITDA that we believe we can actively pursue.

 

Continue to Invest in Recruiting, Training and Safety

 

Our employees are one of the key drivers of our success, and we strive to be the employer of choice for highly motivated and skilled equipment operators. We will continue to maintain a strong focus on employee development and provide a robust safety and risk management program, including in-house and field safety training, safety seminars, and site visits for all operators. We view our comprehensive training program and superior workplace safety record as providing a distinct advantage over competitors. By maintaining an experienced and loyal workforce, we are able to provide superior service to our customers, and grow our industry name recognition.

 

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Proposed Capital Acquisition

 

 

On March 18, 2019, we, Brundage-Bone and CPH Acquisition, LLC, a Delaware limited liability company and wholly owned subsidiary of Brundage-Bone (“CPHA LLC” and, together with Brundage-Bone, the “Buyers”), entered into an Interest Purchase Agreement (the “Interest Purchase Agreement”) with ASC Equipment, LP, a Texas limited partnership (“ASC”), Capital Pumping, LP, a Texas limited partnership (“Capital Pumping”), MC Services, LLC, a Texas limited liability company (“MCS” and, together with ASC and Capital Pumping, the “Capital Companies”; collectively, these companies operate as “Capital Pumping.”), Capital Rentals, LLC, a Texas limited liability company (“CR LLC”), Central Texas Concrete Services, LLC, a Texas limited liability company (“CTCS”), A. Keith Crawford (“A. Crawford”) and Melinda Crawford (“M. Crawford” and, together with the Capital Companies, CR LLC, CTCS and A. Crawford, the “Sellers”), pursuant to which, subject to the satisfaction or waiver of certain conditions set forth therein, (i) Brundage-Bone will purchase all of the outstanding (x) limited partnership interests in Capital Pumping and ASC from A. Crawford and (y) limited liability company interests in MCS from M. Crawford, and (ii) CPHA LLC will purchase all of the general partnership interests in Capital Pumping and ASC from CR LLC and CTCS, respectively (the transactions contemplated by the Interest Purchase Agreement, the “Capital Acquisition”). As a result of the Capital Acquisition, each of the Capital Companies will become our wholly-owned indirect subsidiaries. The consideration for the Capital Acquisition will consist of an aggregate of $129.2 million payable in cash, subject to adjustments as described in the Interest Purchase Agreement (the “Capital Acquisition Consideration”).

 

We expect the Capital Acquisition to close promptly following the closing of this offering, subject to the satisfaction or waiver of certain conditions described in this prospectus under the heading “The Proposed Capital Acquisition.” However, we cannot provide any assurance as to the actual timing of completion of the Capital Acquisition, or whether the Capital Acquisition will be completed at all. Furthermore, we currently intend to use a portion the net proceeds from this offering to finance a portion of the Capital Acquisition Consideration. If we are unable to raise sufficient net proceeds from this offering to provide funds for a portion of the Capital Acquisition Consideration, we will need to obtain alternative sources of financing, which may not be available at terms acceptable to us, or at all, resulting in us being unable to consummate the Capital Acquisition. This offering is not conditioned on the consummation of the Capital Acquisition or any other transaction. For additional information, please see the heading “The Proposed Capital Acquisition" and the “Risk Factors” section for certain risks relating to the Capital Acquisition.

 

Capital Pumping was founded in 1971 initially as Capital Rentals Inc. In 2002, A. Crawford purchased the asset of Capital Rentals Inc. from the Faulkner Group and continued the business as Capital Pumping.  Subsequently, Capital Pumping also acquired the assets of Viking Concrete Pumping in Austin, Texas. Collectively, these companies operate as Capital Pumping.

 

Capital Pumping is a leading provider of concrete pumping services to the residential and commercial construction sectors in Texas.  Capital Pumping operates what we believe is the youngest fleet of scale in the industry, consisting of over 130 boom pumps and 10 pieces of additional specialized equipment.  Concrete pumping services are delivered from 12 locations throughout West, Central and South Texas.

 

Recent Exploration of Private Offering

 

Prior to the offering to which this prospectus relates, we pursued a private offering in which we sought to raise up to approximately $135 million in proceeds from the sale of our securities. The private offering was made solely to persons or entities whom we reasonably believed to be institutional accredited investors. We terminated the private offering on March 15, 2019. We did not accept any offers to buy or indications of interest in the private offering. This prospectus supersedes any offering materials used in the private offering.

 

Risk Factors

 

Our business is subject to numerous risks and uncertainties, including those highlighted in the section entitled “Risk Factors” immediately following this prospectus summary, that represent challenges that we face in connection with the successful implementation of our strategy and the growth of our business.

 

Corporate Information

 

Industrea was incorporated as a blank check company on April 7, 2017 as a Delaware corporation, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We were incorporated on August 29, 2018 as a Delaware corporation solely for the purpose of effectuating the business combination (the “Business Combination”) with a private operating company formerly called Concrete Pumping Holdings, Inc. (“CPH”) and Industrea, which was consummated on December 6, 2018 (the “Closing”). Upon the Closing, all outstanding shares of Industrea’s common stock were exchanged on a one-for-one basis for shares of our common stock, and Industrea’s outstanding warrants were assumed by us and became exercisable for shares of our common stock on the same terms as were contained in such warrants prior to the Business Combination. By operation of Rule 12g-3(a) under the Exchange Act, the Company is the successor issuer to Industrea and has succeeded to the attributes of Industrea as the registrant, including Industrea’s SEC file number (001-38166) and CIK Code (0001703956). In connection with the Closing, we changed our name from “Concrete Pumping Holdings Acquisition Corp.” to “Concrete Pumping Holdings, Inc.”

 

Our principal executive offices are located at 6461 Downing Street, Denver, Colorado 80229, and our telephone number is (303) 289-7497. Our website address is www.concretepumpingholdings.com. We make our periodic reports and other information filed with or furnished to the Securities and Exchange Commission (the “SEC”) available free of charge through our website as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference into, and does not constitute a part of, this prospectus.

 

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The Offering

 

Issuer

Concrete Pumping Holdings, Inc.

 

Common stock offered by us

 15,000,000 shares (or 17,250,000 shares if the underwriters exercise their option to purchase additional shares).

 

Common stock to be outstanding immediately

after this offering

  55,214,153 shares

 

Use of proceeds

The net proceeds to us from this offering, after deducting the underwriting discount and estimated offering expenses payable by us, will be approximately $93.2 million, based on an assumed public offering price of $6.54 per share, the last reported sales price of our common stock on Nasdaq on May 3, 2019 (or $107.2  million if the underwriters exercise their option to purchase additional shares).  

 

We intend to use the net proceeds from this offering to finance a portion of the Capital Acquisition Consideration, as well as transaction costs incurred in connection with the Capital Acquisition. Any proceeds from this offering in excess of amounts used to pay costs related to the Capital Acquisition will be used for general corporate purposes, including working capital and capital expenditures. If the Capital Acquisition is not consummated, we intend to use the proceeds from this offering for general corporate purposes. For a more complete description of our intended use of the net proceeds from this offering, see “Use of Proceeds” and “The Proposed Capital Acquisition.”

 

 

Market and trading symbol for our common stock

Our common stock is currently listed on Nasdaq under the symbol “BBCP.”

 

 Risk Factors

Any investment in the securities offered hereby is speculative and involves a high degree of risk. You should carefully consider the information set forth under “Risk Factors” in this prospectus.

 

 

The number of shares of our common stock outstanding after this offering is based on 40,214,153 shares outstanding as of May 3, 2019, and excludes (i) 1,885,442 shares of common stock reserved for issuance under the Concrete Pumping Holdings, Inc. 2018 Omnibus Incentive Plan (the “2018 Plan”), and (ii) 1,210,455 shares of common stock issuable upon exercise of outstanding stock options granted pursuant to the 2018 Plan at a weighted average exercise price of $2.27 per share, and (iii) 13,017,777 shares of common stock underlying outstanding warrants to purchase shares of our common stock, each with an exercise price of $11.50 per share.

 

Except as otherwise indicated, information in this prospectus reflects or assumes no exercise of the underwriters’ option to purchase up to 2,250,000  additional shares of our common stock.

 

 

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Summary Consolidated Financial Information

 

Prior to the Business Combination, Industrea was a blank check company with nominal operations. On December 6, 2018, we completed the Business Combination, whereby we acquired (i) CPH and (ii) Industrea. In the Business Combination, Industrea was deemed the accounting acquirer and CPH was deemed the acquiree, and our accounting predecessor. As a result of the application of the acquisition method of accounting as of the effective time of the Business Combination, the accompanying summary historical financial information includes a black line division which indicates that the Predecessor and Successor reporting entities shown are presented on a different basis and are, therefore, not comparable. The period presented from December 6, 2018 through January 31, 2019 is the “Successor” period. The periods presented from November 1, 2018 through December 5, 2018, as well as the three months ended January 31, 2018 and the years ended October 31, 2018, 2017 and 2016, are the “Predecessor” periods.

 

The following tables set forth summary consolidated financial information as of January 31, 2019 (Successor) and October 31, 2018, 2017 and 2016 (Predecessor), from December 6, 2018 through January 31, 2019 (Successor), from November 1, 2018 through December 5, 2018 (Predecessor), for the three months ended January 31, 2018 (Predecessor), and for the years ended October 31, 2018, 2017 and 2016 (Predecessor). The consolidated financial information for the pre-acquisition periods for the three months ended January 31, 2018 (Predecessor), from November 1, 2018 through December, 5 2018 (Predecessor) and the post-acquisition period from December 6, 2018 through January 31, 2019 (Successor) is derived from the unaudited consolidated financial statements of the Company included elsewhere in this prospectus. The consolidated financial information as of October 31, 2018 and 2017 (Predecessor) and for the years ended October 31, 2018, 2017 and 2016 (Predecessor) is derived from the audited consolidated financial statements of CPH, our accounting predecessor, included elsewhere in this prospectus.

 

The historical financial information of Industrea (a special purpose acquisition company, or SPAC) prior to the Business Combination has not been reflected in the Predecessor financial statements as these historical amounts have been determined to be not useful information to a user of the financial statements. SPACs deposit the proceeds from their initial public offerings into a segregated trust account until a business combination occurs, where such funds are then used to either pay consideration for either the acquiree or stockholders who elect to redeem their shares of common stock in connection with the Business Combination. SPACs will operate until the closing of a business combination, and the SPAC’s operations until the closing of a business combination, other than income from the trust account investments and transaction expenses, are nominal. Accordingly, no other activity in the Company was reported for periods prior to December 6, 2018 besides CPH’s operations as Predecessor.

 

The unaudited interim consolidated financial information set forth below was prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, on the same basis as our audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal, recurring adjustments, that are necessary for the fair statement of our consolidated financial position as of January 31, 2019 and our consolidated results of operations for the periods presented. You should read the following summary consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company” and our consolidated financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any other period in the future.

 

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Successor

   

Predecessor

 
                           

Year Ended October 31,

 

(in thousands)

 

December 6,

2018 through
January 31, 2019

   

November 1,

2018 through
December 5, 2018

   

November 1,

2017 through
January 31, 2018

   

2018

   

2017

   

2016

 
   

(unaudited)

   

(unaudited)

   

(unaudited)

                         

Statement of operations data:

                                               

Revenue

  $ 33,970     $ 24,396     $ 52,802     $ 243,223     $ 211,211     $ 172,426  

Operating (loss) income

    (814

)

    (8,734

)

    9,089       39,967       32,405       30,902  

Net (loss) income

  $ (3,630

)

  $ (22,575

)

  $ 17,558     $ 28,381     $ 913     $ 6,234  
                                                 
                                                 

Net (loss) income per share-basic

  $ (0.14

)

  $ (3.00

)

  $ 1.74     $ 2.72     $ (0.12

)

  $ 0.46  

Net (loss) income per share-diluted

  $ (0.14

)

  $ (3.00

)

  $ 1.55     $ 2.47     $ (0.12

)

  $ 0.42  

 

   

Successor

   

Predecessor

 
                                 
   

As of January 31,

   

As of October 31,

 
   

2019

   

2018

   

2017

   

2016

 
   

(unaudited)

                         

(in thousands)

                               

Balance sheet data:

                               

Cash and cash equivalents

  $ 4,767     $ 8,621     $ 6,925     $ 3,249  

Total assets

  $ 735,448     $ 370,144     $ 338,847     $ 254,929  

Total current liabilities

  $ 66,791     $ 94,950     $ 96,302     $ 31,583  

Total long term liabilities

  $ 397,044     $ 214,501     $ 208,717     $ 186,249  

Redeemable convertible preferred stock (mezzanine equity)

  $ 25,000     $ 14,672     $ 14,672     $ 15,182  

Total stockholders’ equity

  $ 246,613     $ 46,021     $ 19,156     $ 21,915  

 

   

Successor

   

Predecessor

 
                                                 
                           

Year Ended October 31,

 
   

December 6,

2018 through
January 31,

2019

   

November 1,

2018 through
December 5,

2018

   

November 1,

2017 through
January 31,

2018

   

2018

   

2017

   

2016

 
                                                 

(in thousands)

                                               

Other financial data (unaudited):

                                               

Adjusted EBITDA(1)

  $ 7,560     $ 9,588     $ 16,371     $ 78,868     $ 68,364     $ 59,644  

 

(1) Adjusted EBITDA measures performance by adjusting EBITDA for certain income and expense items that are not considered part of CPH’s core operations. See “Non-GAAP Measures (Adjusted EBITDA)” below for an explanation of this measure and reconciliation to net income, the most comparable GAAP measure.

 

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Non-GAAP Measures (Adjusted EBITDA)

 

We calculate EBITDA by taking GAAP net income and adding back interest expense, net, income taxes, depreciation and amortization. Adjusted EBITDA is calculated by taking EBITDA and adding back transaction expenses, other adjustments, management fees and other expenses. We believe these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends related to our financial condition and results of operations, as a tool for investors to use in evaluating our ongoing operating results and trends and in comparing our financial measures with competitors who also present similar non-GAAP financial measures. In addition, these measures (1) are used in quarterly financial reports prepared for management and our Board and (2) help management to determine incentive compensation. EBITDA and Adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for performance measures calculated under GAAP. This non-GAAP measure excludes certain cash expenses that we are obligated to make. In addition, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently or may not calculate it at all, which limits the usefulness of EBITDA and Adjusted EBITDA as comparative measures.

 

The following table presents a reconciliation of our consolidated net income (loss) to EBITDA and Adjusted EBITDA:

 

   

Successor

   

Predecessor

 
                                                 
   

December 6,
2018 through

   

November 1,
2018 through

   

Three months

ended

   

Years Ended October 31,

 
   

January 31,

2019

   

December 5,

2018

   

January 31,

2018

   

2018

   

2017

   

2016

 

Statement of operations information:

                                               

Net income (loss)

  $ (3,630 )   $ (22,575 )   $ 17,558     $ 28,382     $ 913     $ 6,234  

Interest expense, net

    5,592       1,644       5,087       21,425       22,748       19,516  

Income tax (benefit) expense

    (2,765 )     (4,192 )     (13,544 )     (9,784 )     3,757       4,454  

Depreciation and amortization

    8,374       2,713       5,950       25,623       27,154       22,310  

EBITDA

    7,571       (22,410 )     15,051       65,646       54,572       52,514  

Transaction expenses(1)

    -       14,167       8       7,590       4,490       3,691  

Loss on debt extinguishment

    -       16,395       -       -       5,161       644  

Other (income) expense

    (11 )     (6 )     (12 )     (55 )     (174 )     54  

Other adjustments(2)

    -       1,442       1,324       5,687       4,315       2,741  

Adjusted EBITDA

  $ 7,560     $ 9,588     $ 16,371     $ 78,868     $ 68,364     $ 59,644  

 

 

(1)

Transaction expenses represented expenses incurred for legal, accounting, and other professionals that were engaged in the completion of various acquisitions.

 

(2)

Other adjustments include severance expenses, senior executive relocation costs, management fees, recruiting costs and non-cash expenses such as stock-based compensation.

 

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Summary Unaudited Pro Forma Condensed Combined Financial Information

 

The following summary unaudited pro forma combined statement of operations data for the three months ended January 31, 2019 (on a combined basis with respect to Predecessor and Successor periods) and year ended October 31, 2018 presents our combined unaudited results of operations after giving effect to the Warrant Exchange, the Business Combination, the Capital Acquisition, the proposed debt financing and this offering as if each had been completed as of November 1, 2017. The following pro forma combined balance sheet data presents our combined financial position as of January 31, 2019 after giving effect to the Warrant Exchange, the Capital Acquisition, the proposed debt financing and this offering as if each had been completed as of January 31, 2019. Information for the Capital Companies included is as of and for the year ended December 31, 2018 and interim information is as of and for the quarter ended March 31, 2019. The summary unaudited pro forma condensed consolidated financial data has been prepared from, and should be read in conjunction with, the unaudited pro forma condensed combined financial information set forth under the caption “Unaudited Pro Forma Condensed Combined Financial Information” and the historical consolidated financial statements and notes thereto of the Company and the historical consolidated financial statements of the Capital Companies, each included elsewhere in this prospectus.

 

The summary historical profit and loss accounts of each of these entities have been prepared in accordance with U.S. GAAP. The pro forma acquisition adjustments described in the summary unaudited pro forma condensed consolidated financial information are based on available information and certain assumptions made by us and may be revised as additional information becomes available as the purchase accounting for the acquisition is finalized. The pro forma adjustments are based on preliminary estimates of the fair values of assets acquired and information available as of the date of this prospectus. Certain valuations are currently in process. Actual results may differ from the amounts reflected in the unaudited pro forma condensed consolidated financial statements, and the differences may be material.

 

The unaudited pro forma condensed consolidated financial information included in this prospectus is not intended to represent what our results of operations would have been if the Warrant Exchange, the Business Combination, the Capital Acquisition, the proposed debt financing and this offering had occurred on November 1, 2017 (or January 31, 2019) or to project our results of operations for any future period. Therefore, the unaudited pro forma condensed consolidated financial results may not be comparable to, or indicative of, future performance.

 

This pro forma information is subject to risks and uncertainties, including those discussed in “Risk Factors.”

 

 

 

Summary Unaudited Pro Forma Condensed Combined Statement of Operations Information

 

(in thousands, except share and per share data)

 

Three Months Ended

January 31, 2019

   

Year Ended

October 31, 2018

 

Revenue

  $ 72,359     $ 292,753  

Net (loss) income available to common shareholders

  $ (16,551

)

  $ 12,671  

Basic (loss) earnings per share from continuing operations available to common stockholders

  $ (0.35

)

  $ 0.27  

Diluted (loss) earnings per share from continuing operations available to common stockholders

  $ (0.35

)

  $ 0.25  

Weighted average shares outstanding – Basic

    47,657       47,657  

Weighted average shares outstanding – Diluted

    47,657       50,024  

 

Summary Unaudited Pro Forma Condensed Combined Balance Sheet Information

 

(in thousands, except share and per share data)

 

As of
January 31, 2019

 

Total assets

  $ 865,933  

Redeemable convertible preferred stock (mezzanine equity)

  $ 25,000  

Total stockholders’ equity

  $ 337,398  

Total liabilities and stockholders’ equity

  $ 865,933  

 

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Risk Factors

 

An investment in our securities involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, prospects, financial condition, or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The trading price of our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment.

 

Risks Related to our Business and Operations

 

Our business is cyclical in nature and a slowdown in the economic recovery or a decrease in general economic activity could have a material adverse effect on our revenues and operating results.

 

Substantially all of our customer base comes from the commercial, infrastructure and residential construction sectors. A worsening of economic conditions or a decrease in available capital for investments could cause weakness in our end markets, cause declines in construction and industrial activity, and adversely affect our revenue and operating results.

 

The following factors, among others, may cause weakness in our end markets, either temporarily or long-term:

 

 

the depth and duration of an economic downturn and lack of availability of credit;

 

uncertainty regarding global, regional or sovereign economic conditions;

 

reductions in corporate spending for plants and facilities or government spending for infrastructure projects;

 

the cyclical nature of our customers’ businesses, particularly those operating in the commercial, infrastructure and residential construction sectors;

 

an increase in the cost of construction materials;

 

a decrease in investment in certain of our key geographic regions;

 

an increase in interest rates;

 

an overcapacity in the businesses that drive the need for construction;

 

adverse weather conditions, which may temporarily affect a particular region or regions;

 

reduced construction activity in our end markets;

 

terrorism or hostilities involving the United States or the United Kingdom;

 

change in structural construction designs of buildings (e.g., wood versus concrete);

 

negative impact on our U.K. business as a result of Brexit; and

 

oversupply of equipment or new entrants into the market causing pricing pressure.

 

A downturn in any of our end markets in one or more of our geographic regions caused by these or other factors could have a material adverse effect on our business, financial conditions, results of operations and cash flows.

 

Our business is seasonal and subject to adverse weather.

 

Since our business is primarily conducted outdoors, erratic weather patterns, seasonal changes and other weather related conditions affect our business. Adverse weather conditions, including hurricanes and tropical storms, cold weather, snow, and heavy or sustained rainfall, reduce construction activity, restrict the demand for our products and services, and impede our ability to deliver and pump concrete efficiently or at all. In addition, severe drought conditions can restrict available water supplies and restrict production. Consequently, these events could adversely affect our business, financial condition, results of operations, liquidity and cash flows.

 

Our revenue and operating results have varied historically from period to period and any unexpected periods of decline could result in an overall decline in our available cash flows.

 

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Our revenue and operating results have varied historically from period to period and may continue to do so. We have identified below certain of the factors that may cause our revenue and operating results to vary:

 

 

seasonal weather patterns in the construction industry on which we rely, with activity tending to be lowest in the winter and spring;

 

the timing of expenditure for maintaining existing equipment, new equipment and the disposal of used equipment;

 

changes in demand for our services or the prices we charge due to changes in economic conditions, competition or other factors;

 

changes in the interest rates applicable to our variable rate debt, and the overall level of our debt;

 

fluctuations in fuel costs;

 

general economic conditions in the sectors where we operate;

 

the cyclical nature of our customers’ businesses;

 

price changes in response to competitive factors;

 

other cost fluctuations, such as costs for employee-related compensation and benefits;

 

labor shortages, work stoppages or other labor difficulties and labor issues in trades on which our business may be dependent in particular regions;

 

potential enactment of new legislation affecting our operations or labor relations;

 

timing of acquisitions and new branch openings and related costs;

 

possible unrecorded liabilities of acquired companies and difficulties associated with integrating acquired companies into our existing operations;

 

changes in the exchange rate between the United States dollar and Great Britain pound sterling;

 

potential increased demand from our customers to develop and provide new technological services in our business to meet changing customer preferences;

 

our ability to control costs and maintain quality;

 

our effectiveness in integrating new locations and acquisitions; and

 

possible write-offs or exceptional charges due to changes in applicable accounting standards, goodwill impairments, reorganizations or restructurings, obsolete or damaged equipment or the refinancing of our existing debt.

 

Our business is highly competitive and competition may increase, which could have a material adverse effect on our business.

 

The concrete pumping industry is highly competitive and fragmented. Many of the markets in which we operate are served by several competitors, ranging from larger regional companies to small, independent businesses with a limited fleet and geographic scope of operations. Some of our principal competitors may have more flexible capital structures or may have greater name recognition in one or more of our geographic markets and may be better able to withstand adverse market conditions within the industry. We generally compete on the basis of, among other things, quality and breadth of service, expertise, reliability, price and the size, quality and availability of our fleet of pumping equipment, which is significantly affected by the level of our capital expenditures. If we are required to reduce or delay capital expenditures for any reason, including due to restrictions contained in, or debt service payments required by, our credit facilities or otherwise, or due to the use of cash for acquisitions, the ability to replace our fleet or the age of our fleet may put us at a disadvantage to our competitors and adversely impact our ability to generate revenue. In addition, our industry may be subject to competitive price decreases in the future, particularly during cyclical downturns in our end markets, which can adversely affect revenue, profitability and cash flow. We may encounter increased competition from existing competitors or new market entrants in the future, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

 

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We are dependent on our relationships with key suppliers to obtain equipment for our business.

 

We depend on a small group of key manufacturers of concrete pumping equipment, and has historically relied primarily on three companies, the largest two of which experienced ownership changes in 2012. We cannot predict the impact on our suppliers of changes in the economic environment and other developments in their respective businesses, and we cannot provide any assurance that our vendors will provide their historically high level of service support and quality. Any deterioration in such service support or quality could result in additional maintenance costs, operational issues, or both. Insolvency, financial difficulties, strategic changes or other factors may result in our suppliers not being able to fulfill the terms of their agreements with us, whether satisfactorily or at all. Further, such factors may render suppliers unwilling to extend contracts that provide favorable terms to us, or may force them to seek to renegotiate existing contracts with us. We believe the market for supplying equipment used in our business is increasingly competitive; however, termination of our relationship with any of our key suppliers, or interruption of our access to concrete pumping equipment, pipe or other supplies, could have a material adverse effect on our business, financial condition, results of operations and cash flows in the event that we are unable to obtain adequate and reliable equipment or supplies from other sources in a timely manner or at all.

 

If our average fleet age increases, our offerings may not be as attractive to potential customers and our operating costs may increase, impacting our results of operations.

 

As our equipment ages, the cost of maintaining such equipment, if not replaced within a certain period of time or amount of use, will likely increase. We estimate that our fleet assets generally will have a useful life of up to 25 years depending on the size of the machine, hours in service, yardage pumped, and, in certain instances, other circumstances unique to an asset. We manage our fleet of equipment according to the wear and tear that a specific type of equipment is expected to experience over its useful life. As of January 31, 2019, the average age of our equipment was approximately 9 years, and it is our strategy to maintain average fleet age at approximately 10 years. If the average age of our equipment increases, whether as a result of our inability to access sufficient capital to maintain or replace equipment in a timely manner or otherwise, our investment in the maintenance, parts and repair for individual pieces of equipment may exceed the book value or replacement value of that equipment. We cannot assure you that costs of maintenance will not materially increase in the future. Any material increase in such costs could have a material adverse effect on our business, financial condition and results of operations. Additionally, as our equipment ages, it may become less attractive to potential customers, thus decreasing our ability to effectively compete for new business.

 

The costs of new equipment we use in our fleet may increase, requiring us to spend more for replacement equipment or preventing us from procuring equipment on a timely basis.

 

The cost of new equipment for use in our concrete pumping fleet could increase due to increased material costs to our suppliers or other factors beyond our control. Such increases could materially adversely impact our financial condition, results of operations and cash flows in future periods. Furthermore, changes in technology or customer demand could cause certain of our existing equipment to become obsolete and require us to purchase new equipment at increased costs.

 

We sell used equipment on a regular basis. Our fleet is subject to residual value risk upon disposition, and may not sell at the prices or in the quantities we expect.

 

We continuously evaluate our fleet of equipment as we seek to optimize our vehicle size and capabilities for our end markets in multiple locations. We therefore seek to sell used equipment on a regular basis. The market value of any given piece of equipment could be less than its depreciated value at the time it is sold. The market value of used equipment depends on several factors, including:

 

 

the market price for comparable new equipment;

 

wear and tear on the equipment relative to its age and the effectiveness of preventive maintenance;

 

the time of year that it is sold;

 

the supply of similar used equipment on the market;

 

the existence and capacities of different sales outlets;

 

the age of the equipment, and the amount of usage of such equipment relative to its age, at the time it is sold;

 

worldwide and domestic demand for used equipment;

 

the effect of advances and changes in technology in new equipment models;

 

changing perception of residual value of used equipment by our suppliers; and

 

general economic conditions.

 

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We include in income from operations the difference between the sales price and the depreciated value of an item of equipment sold. Changes in our assumptions regarding depreciation could change our depreciation expense, as well as the gain or loss realized upon disposal of equipment. Sales of our used concrete pumping equipment at prices that fall significantly below our expectations or in lesser quantities than we anticipate could have a negative impact on our financial condition, results of operations and cash flows.

 

We are exposed to liability claims on a continuing basis, which may exceed the level of our insurance or not be covered at all, and this could have a material adverse effect on our operating performance.

 

Our business exposes itself to claims for personal injury, death or property damage resulting from the use of the equipment we operate, rent, sell, service or repair and from injuries caused in motor vehicle or other accidents in which our personnel are involved. Our business also exposes it to worker compensation claims and other employment-related claims. We carry comprehensive insurance, subject to deductibles, at levels we believe are sufficient to cover existing and future claims. Future claims may exceed the level of our insurance, and our insurance may not continue to be available on economically reasonable terms, or at all. Certain types of claims, such as claims for punitive damages, are not covered by our insurance. In addition, we are self-insured for the deductibles on our policies and have established reserves for incurred but not reported claims. If actual claims exceed our reserves, our results of operations could be adversely affected. Whether or not we are covered by insurance, certain claims may generate negative publicity, which may lead to lower revenues, as well as additional similar claims being filed.

 

Our business is subject to significant operating risks and hazards that could result in personal injury or damage or destruction to property, which could result in losses or liabilities to us.

 

Construction sites are potentially dangerous workplaces and often put our employees and others in close proximity with mechanized equipment and moving vehicles. Our equipment has been involved in workplace incidents and incidents involving mobile operators of our equipment in transit in the past and may be involved in such incidents in the future.

 

Our safety record is an important consideration for us and for our customers. If serious accidents or fatalities occur, regardless of whether we were at fault, or our safety record were to deteriorate, we may be ineligible to bid on certain work, be exposed to possible litigation, and existing service arrangements could be terminated, which could have a material adverse impact on our financial position, results of operations, cash flows and liquidity. Adverse experience with hazards and claims could have a negative effect on our reputation with our existing or potential new customers and our prospects for future work.

 

In the commercial concrete infrastructure sector, our workers are subject to the usual hazards associated with providing construction and related services on construction sites, including environmental hazards, industrial accidents, hurricanes, adverse weather conditions and flooding. Operating hazards can cause personal injury or death, damage to or destruction of property, plant and equipment, environmental damage, performance delays, monetary losses or legal liability.

 

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Potential acquisitions and expansions into new markets may result in significant transaction expense and expose us to risks associated with entering new markets and integrating new or acquired operations.

 

We may encounter risks associated with entering new markets in which we have limited or no experience. New operations require significant capital expenditures and may initially have a negative impact on our short-term cash flow, net income and results of operations. New start-up locations may not become profitable when projected or ever. In addition, our industry is highly fragmented and we expect to consider acquisition opportunities from time to time when we believe they would enhance our business and financial performance.

 

Acquisitions, such as the Capital Acquisition, may impose significant strains on our management, operating systems and financial resources, and could experience unanticipated integration issues. The pursuit and integration of acquisitions, such as the Capital Acquisition, may require substantial attention from our senior management, which will limit the amount of time they have available to devote to our existing operations. Our ability to realize the expected benefits from any future acquisitions, such as the Capital Acquisition, depends in large part on our ability to integrate and consolidate the new operations with our existing operations in a timely and effective manner. Future acquisitions, such as the Capital Acquisition, also could result in the incurrence of substantial amounts of indebtedness and contingent liabilities (including environmental, employee benefits and safety and health liabilities), accumulation of goodwill that may become impaired, an increase in amortization expenses related to intangible assets, and potential penalties or other break fees if such negotiated acquisitions are not consummated. Any significant diversion of management’s attention from our existing operations, the loss of key employees or customers of any acquired business, any major difficulties encountered in the opening of start-up locations or the integration of acquired operations or any associated increases in indebtedness, liabilities or expenses could have a material adverse effect on our business, financial condition or results of operations.

 

We may not realize the anticipated synergies and cost savings from acquisitions.

 

We have completed a number of acquisitions in recent years that we believe present revenue and cost-saving synergy opportunities and we expect to realize significant synergies from the Capital Acquisition. However, the integration of recent or future acquisitions may not result in the realization of the full benefits of the revenue and cost synergies that we expected at the time or currently expect within the anticipated time frame or at all. Moreover, we may incur substantial expenses or unforeseen liabilities in connection with the integration of acquired businesses, including in connection with the Capital Acquisition. While we anticipate that certain expenses will be incurred, such expenses are difficult to estimate accurately and may exceed our estimates. Accordingly, the expected benefits may be offset by costs or delays incurred in integrating the businesses. Failure of recent or future acquisitions to meet our expectations and be integrated successfully could have a material adverse effect on our financial condition and results of operations.

 

We have operations throughout the United States and the United Kingdom, which subjects us to multiple federal, state, and local laws and regulations. Moreover, we operate at times as a government contractor or subcontractor which subjects us to additional laws, regulations, and contract provisions. Changes in law, regulations, government contract provisions, or other legal requirements, or our material failure to comply with any of them, can increase our costs and have other negative impacts on our business.

 

As of January 31, 2019, our locations in the United States, which include 80 locations operated by Brundage-Bone and 14 locations operated by Eco-Pan, provided services across approximately 22 states, and our 28 locations in the U.K. are in England, Scotland and Wales. Each of our sites are exposed to a host of different local laws and regulations. These requirements address multiple aspects of our operations, such as worker safety, consumer rights, privacy, employee benefits, antitrust, emissions regulations and may also impact other areas of our business, such as pricing. In addition, government contracts and subcontracts are subject to a wide range of requirements not applicable in the purely commercial context, such as extensive auditing and disclosure requirements; anti-money laundering, antibribery and anti-gratuity rules; political campaign contribution and lobbying limitations; and small and/or disadvantaged business preferences. Even when a government contractor has reasonable policies and practices in place to address these risks and requirements, it is still possible for problems to arise. Moreover, government contracts or subcontracts are generally riskier than commercial contracts, because, when problems arise, the adverse consequences can be severe, including civil false claims (which can involve penalties and treble damages), suspension and debarment, and even criminal prosecution. Moreover, the requirements of laws, regulations, and government contract provisions are often different in different jurisdictions. Changes in these requirements, or any material failure by us to comply with them, can increase our costs, negatively affect our reputation, reduce our business, require significant management time and attention and generally otherwise impact our operations in adverse ways.

 

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We are subject to numerous environmental and safety regulations. If we are required to incur compliance or remediation costs that are not currently anticipated, our liquidity and operating results could be materially and adversely affected.

 

Our facilities and operations are subject to comprehensive and frequently changing federal, state and local laws and regulations relating to environmental protection and health and safety. These laws and regulations govern, among other things, occupational safety, employee relations, the discharge of substances into the air, water and land, the handling, storage, transport, use and disposal of hazardous materials and wastes and the cleanup of properties affected by pollutants. We have in the past and may in the future fail to comply with applicable environmental and safety regulations. If we violate environmental or safety laws or regulations, we may be required to implement corrective actions and could be subject to civil or criminal fines or penalties or other sanctions. We cannot assure you that we will not have to make significant capital or operating expenditures in the future in order to comply with applicable laws and regulations or that we will comply with applicable environmental laws at all times. Such violations or liability could have a material adverse effect on our business, financial condition and results of operations.

 

Environmental laws also impose obligations and liability for the investigation and cleanup of properties affected by releases or spills of hazardous substances or fuels. These liabilities can be imposed jointly and severally without regard to fault or intent on the parties who own or operate the contaminated land, who arranged for the transport of hazardous substances to the land for disposal, or who transported the hazardous substances. We may also have liability for any contaminated properties historically owned or operated by companies that we have acquired or merged with, even though we never owned or operated such properties. Accordingly, we may become liable, either contractually or by operation of law, for investigation, remediation, monitoring and other costs even if the contaminated property is not presently owned or operated by us, is owned or primarily operated by a customer of ours but has been impacted by our services, was formerly owned or operated by a predecessor in interest to us, or if the contamination was caused by third parties during or prior to our ownership or operation of the property. Contamination and exposure to hazardous substances can also result in claims for damages, including personal injury, property damage, and natural resources damage claims.

 

Most of our properties currently have above or below ground storage tanks for fuel and other petroleum products and oil-water separators (or equivalent wastewater collection/treatment systems). Given the nature of our operations (which involve the use of diesel and other petroleum products, solvents and other hazardous substances) for fueling and maintaining our equipment and vehicles, the generation, handling and transport of concrete “washout” and other waste at and from customer job sites, and the historical operations at some of our properties, we may incur material costs associated with soil or groundwater contamination. Future events, such as changes in existing laws or policies or their enforcement, or the discovery of currently unknown contamination, may give rise to remediation liabilities or other claims or costs that may be material.

 

Our business depends on favorable relations with our employees, and any deterioration of these relations, labor shortages or increases in labor costs could adversely affect our business, financial condition and results of operations and our collective bargaining agreements and our relationship with our union-represented employees could disrupt our ability to serve our customers, lead to higher labor costs or the payment of withdrawal liability in connection with multiemployer plans.

 

As of January 31, 2019, approximately 13% of our employees in the United States (but none of our employees in the United Kingdom) were represented by unions or covered by collective bargaining agreements. The states in which our employees are represented by unions or covered by collective bargaining agreements are California, Washington and Oregon. There can be no assurance that our non-unionized employees will not become members of a union or become covered by a collective bargaining agreement, including through an acquisition of a business whose employees are subject to such an agreement. Any significant deterioration in employee relations, shortages of labor or increases in labor costs at any of our locations could have a material adverse effect on our business, financial condition or results of operations. A slowdown or work stoppage that lasts for a significant period of time could cause lost revenues and increased costs and could adversely affect our ability to meet our customers’ needs.

 

Furthermore, our labor costs could increase as a result of the settlement of actual or threatened labor disputes. In addition, our collective bargaining agreement with our union in California and Oregon expire in 2019 and 2020, respectively and will need to be renegotiated. Our collective bargaining agreement with our union in Washington expires in 2037. We cannot assure you that renegotiation of these agreements will be successful or will not result in adverse economic terms or work stoppages or slowdowns.

 

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Under our collective bargaining agreements, we are, and have previously been, obligated to contribute to several multiemployer pension plans on behalf of our unionized employees. A multiemployer pension plan is a defined benefit pension plan that provides pension benefits to the union-represented workers of various generally unrelated companies. Under the Employment Retirement Income Security Act of 1974 (“ERISA”), an employer that has an obligation to contribute to an underfunded multiemployer plan, as well as any other entities that are treated as a single employer with such employer under applicable tax and ERISA rules, may become jointly and severally liable, generally upon complete or partial withdrawal from a multiemployer plan, for its proportionate share of the plan’s unfunded benefit obligations. These liabilities are known as “withdrawal liabilities.” Certain of the multiemployer plans to which we are obligated to contribute have been in the past, and currently remain, significantly underfunded. Moreover, due to the level of underfunding, at least one of these multiemployer plans has been and continues to be in “critical status,” meaning, among other things, that the trustees of the plan are required to adopt a rehabilitation plan and we are required to pay a surcharge on top of our regular contributions to the plan.

 

We currently have no intention of withdrawing, in either a complete or partial withdrawal, from any of the multiemployer plans to which we currently contribute and we have not been assessed any withdrawal liability in the past when we have ceased participating in certain multiemployer plans to which we previously contributed. In addition, we believe that the “construction industry” multiemployer plan exception may apply if we did withdraw from any of our current multiemployer plans. The “construction industry” exception generally delays the imposition of withdrawal liability in connection with an employer’s withdrawal from a “construction industry” multiemployer plan unless and until (among other things) that employer continues or resumes covered operations in the relevant geographic market without continuing or resuming (as applicable) contributions to the multiemployer plan. If this exception applies, withdrawal liability may be delayed or even inapplicable if we cease participation in any multiemployer plan(s). However, there can be no assurance that we will not withdraw from one or more multiemployer plans in the future, that the “construction industry exception” would apply if we did withdraw, or that we will not incur withdrawal liability if we do withdraw. Accordingly, we may be required to pay material amounts of withdrawal liability if one or more of those plans is underfunded at the time of withdrawal and withdrawal liability applies in connection with our withdrawal. In addition, we may incur material liabilities if any multiemployer plan(s) in which we participate requires us to increase our contribution levels to alleviate existing underfunding and/or becomes insolvent, terminates or liquidates.

 

Labor relations matters at construction sites where we provide services may result in increases in our operating costs, disruptions in our business and decreases in our earnings.

 

Labor relations matters at construction sites where we provide services may result in work stoppages, which would in turn affect our ability to provide services at such locations. If any such work stoppages were to occur at work sites where we provide services, we could experience a significant disruption of our operations, which could materially and adversely affect our business, financial condition, results of operations, liquidity, and cash flows. Also, labor relations matters affecting our suppliers could adversely impact our business from time to time.

 

If we determine that our goodwill has become impaired, we may incur impairment charges, which would negatively impact our operating results.

 

At January 31, 2019, we had recorded goodwill of $238.8 million related to the Business Combination. Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations.

 

We assess potential impairment of our goodwill at least annually. Impairment may result from significant changes in the manner of use of the acquired assets, negative industry or economic trends or significant underperformance relative to historical or projected operating results. An impairment of our goodwill may have a material adverse effect on our results of operations.

 

Turnover of members of our management, staff and pump operators and our ability to attract and retain key personnel may affect our ability to efficiently manage our business and execute our strategy.

 

Our business depends on the quality of, and our ability to attract and retain, our senior management and staff, and competition in our industry and the business world for top management talent is generally significant. Although we believe we generally have competitive pay packages, we can provide no assurance that our efforts to attract and retain senior management staff will be successful. In addition, the loss of services of certain members of our senior management could adversely affect our business until suitable replacements can be found.

 

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We depend upon the quality of our staff personnel, including sales and customer service personnel who routinely interact with and fulfill the needs of our customers, and on our ability to attract and retain and motivate skilled operators and fleet maintenance personnel and other associated personnel to operate our equipment in order to provide our concrete pumping services to our customers. There is significant competition for qualified personnel in a number of our markets, including Texas, Colorado, Utah, and Idaho where we face competition from the oil and gas industry for qualified drivers and operators. There is a limited number of persons with the requisite skills to serve in these positions, and such positions require a significant investment by us in initial training of operators of our equipment. We cannot assure you that we will be able to locate, employ, or retain such qualified personnel on terms acceptable to us or at all. Our costs of operations and selling, general and administrative expenses have increased in certain markets and may increase in the future if we are required to increase wages and salaries to attract qualified personnel, and there is no assurance that we can increase our prices to offset any such cost increases. There is also no assurance that we can effectively limit staff turnover as competitors or other employers seek to hire our personnel. A significant increase in such turnover could negatively affect our business, financial condition, results of operations and cash flows.

 

Our credit facilities may limit the business’ financial and operating flexibility.

 

Our credit facilities include negative covenants (including a springing fixed charge coverage ratio financial covenant under the ABL Credit Agreement (as defined below)) restricting our ability to incur additional indebtedness, pay dividends or make other payments, make loans and investments, sell assets, incur certain liens, enter into transactions with affiliates, and consolidate, merge or sell assets. These covenants limit the ability of the respective restricted entities to fund future working capital and capital expenditures, engage in future acquisitions or development activities, or otherwise realize the value of their assets and opportunities fully because of the need to dedicate a portion of cash flow from operations to payments on debt. In addition, such covenants limit the flexibility of the respective restricted entities in planning for, or reacting to, changes in the industries in which they operate.

 

 

We have a significant amount of indebtedness, which could adversely affect our cash flow and our ability to operate our business and to fulfill our obligations under our indebtedness.

 

We have a significant amount of indebtedness. As of January 31, 2019, we had $353.9 million of indebtedness outstanding in addition to $41.4 million of availability under our ABL Credit Agreement.  Furthermore, we expect to finance the Capital Acquisition through the sale of shares of common stock in this offering and an additional $40 million of borrowings under our Term Loan Agreement and we may incur additional indebtedness to finance the Capital Acquisition.  

 

Our substantial level of indebtedness increases the possibility that we may not generate enough cash flow from operations to pay, when due, the principal of, interest on or other amounts due in respect of, these obligations. Other risks relating to our long-term indebtedness include:

 

 

increased vulnerability to general adverse economic and industry conditions;

 

higher interest expense if interest rates increase on our floating rate borrowings and our hedging strategies do not effectively mitigate the effects of these increases;

 

need to divert a significant portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of cash to fund working capital, capital expenditures, acquisitions, investments and other general corporate purposes;

 

limited ability to obtain additional financing, on terms we find acceptable, if needed, for working capital, capital expenditures, acquisitions and other investments, which may adversely affect our ability to implement our business strategy;

 

limited flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate or to take advantage of market opportunities; and

 

a competitive disadvantage compared to our competitors that have less debt.

 

In addition, it is possible that we may need to incur additional indebtedness in the future in the ordinary course of business. The terms of our Term Loan Agreement and the ABL Credit Agreement allow us to incur additional debt subject to certain limitations. If new debt is added to current debt levels, the risks described above could intensify. In addition, our inability to maintain certain leverage ratios could result in acceleration of a portion of our debt obligations and could cause us to be in default if we are unable to repay the accelerated obligations.

Our business could be hurt if we are unable to obtain capital as required, resulting in a decrease in our revenue and cash flows.

We require capital for, among other purposes, purchasing equipment to replace existing equipment that has reached the end of its useful life and for growth resulting from expansion into new markets, completing acquisitions and refinancing existing debt. If the cash that we generate from our business, together with cash that we may borrow under our credit facilities, is not sufficient to fund our capital requirements, we will require additional debt or equity financing. If such additional financing is not available to fund our capital requirements, we could suffer a decrease in our revenue and cash flows that would have a material adverse effect on our business. Furthermore, our ability to incur additional debt is and will be contingent upon, among other things, the covenants contained in our credit facilities. In addition, our credit facilities place restrictions on our and our restricted subsidiaries’ ability to pay dividends and make other restricted payments (subject to certain exceptions). We cannot be certain that any additional financing that we require will be available or, if available, will be available on terms that are satisfactory to us. If we are unable to obtain sufficient additional capital in the future, our business could be materially adversely affected.

 

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under applicable debt instruments, which may not be successful.

 

Our ability to make scheduled payments on or to refinance our indebtedness obligations, including our credit facilities, depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

 

If our cash flows and capital resources are insufficient to fund debt service obligations, we may be forced to reduce or delay investments and capital expenditures, sell assets, seek additional capital or restructure or refinance indebtedness. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict business operations. The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest and principal on outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness.

 

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If we are unable to collect on contracts with customers, our operating results would be adversely affected.

 

We have billing arrangements with a majority of our customers that provide for payment on agreed terms after our services are provided. If we are unable to manage credit risk issues adequately, or if a large number of customers should have financial difficulties at the same time, our credit losses could increase significantly above their low historical levels and our operating results would be adversely affected. Further, delinquencies and credit losses increased during the last recession and generally can be expected to increase during economic slowdowns or recessions.

 

If we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned and our stock price may suffer.

 

Section 404 of the Sarbanes-Oxley Act requires any company subject to the reporting requirements of the U.S. securities laws to do a comprehensive evaluation of its and its consolidated subsidiaries’ internal control over financial reporting. To comply with this statute, we are currently required to document, test and report on our internal controls over financial reporting. In addition, starting in our 2022 fiscal year (and possibly earlier), our independent auditors will be required to issue an opinion on our audit of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of our testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act. For example, we currently have material weaknesses in internal controls over financial reporting relating to (a) lack of segregation of duties to effectively perform detailed review of account reconciliations and journal entries; (b) cut-off and completeness of accrual for accounting close; (c) lack of formally documented precision levels relating to management review controls; (d) accounting for significant and/or unusual transactions; and (e) insufficient restrictions on admin access for information technology in the U.K. The aforementioned material weaknesses in internal control are primarily driven by a lack of resources as we make our transition from a private to public entity.

 

To respond to these material weaknesses, we have retained a global accounting and consulting firm with technical expertise in accounting and SEC reporting matters to support the preparation of our financial statements and assist us in performing additional analysis and other post-closing procedures to ensure that such financial statements were prepared in accordance with GAAP. In addition, we have hired additional personnel with relevant accounting experience, skills and knowledge and plan to add new personnel as we deem necessary.

 

If our management is unable to favorably assess the effectiveness of our internal control over financial reporting or our auditors identify material weaknesses in our internal controls, investor confidence in our financial results may weaken, and our stock price may suffer.

 

Disruptions in our information technology systems due to cyber security threats or other factors could limit our ability to effectively monitor and control our operations and adversely affect our operating results, and unauthorized access to customer information on our systems could adversely affect our relationships with our customers or result in liability.

 

Our information technology systems, including our enterprise resource planning system, facilitate our ability to monitor and control our assets and operations and adjust to changing market conditions and customer needs. Any disruptions in these systems or the failure of these systems to operate as expected could, depending on the magnitude of the problem, adversely affect our operating results by limiting our capacity to effectively monitor and control our assets and operations and adjust to changing market conditions in a timely manner. Many of our business records at most of our branches are still maintained manually, and loss of those records as a result of facility damage, personnel changes or otherwise could also cause such disruptions. In addition, because our systems sometimes contain information about individuals and businesses, our failure to appropriately safeguard the security of the data it holds, whether as a result of our own error or the malfeasance or errors of others, could harm our reputation or give rise to legal liabilities, leading to lower revenue, increased costs and other material adverse effects on our results of operations.

 

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We have taken steps intended to mitigate these risks, including business continuity planning, disaster recovery planning and business impact analysis. However, a significant disruption or cyber intrusion could adversely affect our results of operations, financial condition and liquidity. Furthermore, instability in the financial markets as a result of terrorism, sustained or significant cyber-attacks, or war could also materially adversely affect our ability to raise capital.

 

Fluctuations in fuel costs or reduced supplies of fuel could harm our business.

 

Fuel costs represent a significant portion of our operating expenses and we are dependent upon fuel to transport and operate our equipment. We could be adversely affected by limitations on fuel supplies or increases in fuel prices that result in higher costs of transporting equipment to and from job sites and higher costs to operate our concrete pumps and other equipment. Although we are able to pass through the impact of fuel price charges to most of our customers, there is often a lag before such pass-through arrangements are reflected in our operating results and there may be a limit to how much of any fuel price increases we can pass onto our customers. Any such limits may adversely affect our results of operations.

 

We depend on access to our branch facilities to service our customers and maintain and store our equipment.

 

We depend on our primary branch facilities in the U.S. and U.K., respectively, to store, service and maintain our fleet. These facilities contain most of the specialized equipment we require to service our fleet, in addition to the extensive secure storage areas needed for a significant number of large vehicles. If any of our facilities were to sustain significant damage or become unavailable to us for any reason, including natural disasters, our operations could be disrupted, which could in turn adversely affect our relationships with our customers and our results of operations and cash flow. Any limitation on our access to facilities as a result of any breach of, or dispute under, our leases could also disrupt and adversely affect our operations.

 

Our acquisitions made in the U.K. may divert our resources from other aspects of our business and require us to incur additional debt, and will subject us to additional and different regulations. Failure to manage these economic, financial, business and regulatory risks may adversely impact our growth in the U.K. and our results of operations.

 

Our expansion into the U.K. required, and may continue to require, us to incur additional debt and divert resources from other aspects of our business. In addition, we may incur difficulties in staffing and managing our U.K. operations, and face fluctuations in currency exchange rates, exposure to additional regulatory requirements, including certain trade barriers, changes in political and economic conditions, and exposure to additional and potentially adverse tax regimes. Our success in the U.K. will depend, in part, on our ability to anticipate and effectively manage these and other risks. Our failure to manage these risks may adversely affect our growth in the U.K. and lead to increased administrative and other costs.

 

We may be adversely affected by recent developments relating to the U.K.’s referendum vote in favor of leaving the European Union.

 

The U.K. held a referendum on June 23, 2016 in which a majority voted for the U.K.’s withdrawal from the European Union, which is commonly referred to as Brexit. As a result of this vote, a process of negotiation has begun to determine the terms of Brexit and of the U.K.’s relationship with the European Union going forward. The effects of the Brexit vote and the perceptions as to the impact of the withdrawal of the U.K. from the European Union may adversely affect business activity and economic and market conditions in the U.K., the Eurozone, and globally and could contribute to instability in global financial and foreign exchange markets, including volatility in the value of the pound sterling and the euro. In addition, Brexit could lead to additional political, legal and economic instability in the European Union. Specifically, we have not identified any additional risk factors under Brexit than those discussed herein. Additionally, we have not identified any trends or potential changes to critical accounting estimates as a result of Brexit. We will continue to assess risk factors and accounting and reporting considerations Any of these effects of Brexit, and others we cannot anticipate, could adversely affect the value of our assets in the U.K., as well as our business, financial condition, results of operations and cash flows.

 

Due to the material portion of our business conducted in currency other than U.S. dollars, we have significant foreign currency risk.

 

Our consolidated financial statements are presented in accordance with GAAP, and we report, and will continue to report, our results in U.S. dollars. Some of our operations are conducted by subsidiaries in the United Kingdom. The results of operations and the financial position of these subsidiaries are recorded in the relevant foreign currencies and then translated into U.S. dollars. Any change in the value of the pound sterling against the U.S. dollar during a given financial reporting period would result in a foreign currency loss or gain on the translation of U.S. dollar denominated revenues and costs. The exchange rates between the pound sterling against the U.S. dollar have fluctuated significantly in recent years and may fluctuate significantly in the future. Consequently, our reported earnings could fluctuate materially as a result of foreign exchange translation gains or losses and may not be comparable from period to period.

 

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We face market risks attributable to fluctuations in foreign currency exchange rates and foreign currency exposure on the translation into U.S. dollars of the financial results of our operations in the United Kingdom. Exchange rate fluctuations could have an adverse effect on our results of operations. Both favorable and unfavorable foreign currency impacts to our foreign currency-denominated operating expenses are mitigated to a certain extent by the natural, opposite impact on our foreign currency-denominated revenue. 

 

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.

 

We will be subject to income taxes in the United States, and our domestic tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

 

 

expected timing and amount of the release of any tax valuation allowances;

 

tax effects of stock-based compensation;

 

costs related to intercompany restructurings;

 

changes in tax laws, regulations or interpretations thereof; and

 

lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.

 

In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal and state authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.

 

Risks Related to our Securities

 

There can be no assurance that we will be able to comply with Nasdaq’s continued listing standards.

 

If Nasdaq delists our securities from trading on its exchange for failure to meet the continued listing standards, we and our security holders could face significant material adverse consequences including:

 

 

a limited availability of market quotations for our securities;

 

a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock;

 

a decreased ability to issue additional securities or obtain additional financing in the future.

 

Shares of our common stock have been thinly traded in the past.

 

Although a trading market for our common stock exists, the trading volume has not been significant and there can be no assurance that an active trading market for our common stock will develop or, if developed, be sustained in the future. As a result of the thin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a large float, our common stock is less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stock may be more volatile. In the absence of an active public trading market, an investor may be unable to liquidate his or her investment in our common stock. Trading of a relatively small volume of our common stock may have a greater impact on the trading price for our stock than would be the case if our public float were larger. We cannot predict the prices at which our common stock will trade in the future.

 

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In addition, the price of our securities can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if our securities become delisted from Nasdaq for any reason, and are quoted on the OTC Markets, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

 

If the benefits of the Business Combination and/or the Capital Acquisition do not meet the expectations of investors, stockholders or financial analysts, the market price of our securities may decline.

 

If the benefits of the Business Combination and/or the Capital Acquisition do not meet the expectations of investors or securities analysts, the market price of our securities may decline.

 

If an active market for our securities develops and continues, the trading price of our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.

 

Factors affecting the trading price of our securities may include:

 

 

actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

 

changes in the market’s expectations about our operating results;

 

the public’s reaction to our press releases, our other public announcements and our filings with the SEC;

 

speculation in the press or investment community;

 

success of competitors;

 

our operating results failing to meet the expectation of securities analysts or investors in a particular period;

 

changes in financial estimates and recommendations by securities analysts concerning company or the market in general;

 

operating and stock price performance of other companies that investors deem comparable to us;

 

any failure of the Capital Acquisition to close;

 

our future acquisition activity;

 

our ability to market new and enhanced products on a timely basis;

 

changes in laws and regulations affecting our business;

 

commencement of, or involvement in, litigation involving the Company;

 

changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;

 

the volume of shares of our common stock available for public sale;

 

any major change in our Board or management;

 

sales of substantial amounts of our common stock by our directors, officers or significant stockholders or the perception that such sales could occur; and

 

general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

 

Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

 

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In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.

 

Future sales of our common stock may cause the market price of our securities to drop significantly, even if our business is doing well.

 

Pursuant to that certain stockholders agreement, dated as of December 6, 2018 and amended on April 1, 2019 (the “Stockholders Agreement”), by and between the Company, CFLL Sponsor Holdings, LLC (formerly known as Industrea Alexandria LLC) (“CFLL Sponsor” or the “Sponsor”), Industrea’s former independent directors (collectively with the Sponsor and affiliates, the “Initial Stockholders”), Argand Partners Fund, LP (the “Argand Investor”) and certain holders of CPH’s capital stock prior to the Business Combination (the “CPH stockholders”):

 

 

Subject to certain exceptions, the CFLL Sponsor has agreed not to transfer 4,403,325 shares of our common stock (which were issued upon conversion of Industrea’s Class B common stock in connection with the Business Combination) (the “founder shares”) until the earlier of (A) March 6, 2020 or (B) earlier if (x) the last sale price of our common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing May 5, 2019 or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of our common stock for cash, securities or other property;

 

 

Each CPH Management Holder (as defined therein) has agreed not to transfer any shares of our common stock acquired by such CPH Management Holder in connection with the Business Combination for a period commencing on December 6, 2018 and ending on (a) December 6, 2019 with respect to one-third of such CPH Management Holder’s securities of the Company held as of the date of Closing; (b) December 6, 2020 with respect to one-third of such CPH Management Holder’s securities of the Company held as of the date of Closing; and (c) December 6, 2021 with respect to one-third of such CPH Management Holder’s securities of the Company held as of the date of Closing;

 

 

Each Non-Management CPH Holder (as defined therein) may not transfer any shares of our common stock acquired by such Non-Management CPH Holder in connection with the Business Combination until June 4, 2019; and

 

 

Subject to certain exceptions, until March 6, 2020, (i) CFLL Holdings, LLC (“CFLL Holdings”), an affiliate of the Argand Investor, may not transfer 7,784,313 shares of our common stock held by it and (ii) the CFLL Sponsor may not transfer 1,664,500 shares of our common stock held by it.

 

Notwithstanding the foregoing, if Peninsula Pacific or its affiliates no longer own in excess of 882,353 shares of our common stock, then the transfer restrictions on the shares of our common stock held the CFLL Sponsor and CFLL Holdings will be shortened to December 6, 2019. In addition, transfers of these securities are permitted in certain limited circumstances as set forth in the Stockholders Agreement, including with the prior written consent of our Board (with any director who has been designated to serve on our Board by or who is an affiliate of the requesting party abstaining from such vote) and to “affiliates,” as defined in the Stockholders Agreement.

 

In addition, the Initial Stockholders and certain of our other stockholders who received shares of our common stock in connection with the Closing are entitled to registration rights, subject to certain limitations, with respect to our common stock they received in the Business Combination pursuant to the Stockholders Agreement entered into in connection with the consummation of the Business Combination. Pursuant to the Stockholders Agreement, we filed a registration statement covering the founder shares, the private placement warrants (including any common stock issued or issuable upon exercise of any such private placement warrants) and the shares of our common stock issued at the Closing. In addition, these stockholders have certain demand and “piggyback” registration rights following the consummation of the Business Combination. We will bear certain expenses incurred in connection with the exercise of such rights.

 

Furthermore, we expect to finance the Capital Acquisition through the sale of shares of common stock in this offering and an additional $40 million of borrowings under our Term Loan Agreement and we may incur additional indebtedness to finance the Capital Acquisition.

 

The presence of these additional securities trading in the public market as well as the shares of the Company’s common stock that may be issued pursuant to the Offer and Consent Solicitation, may have an adverse effect on the market price of the Company’s common stock.

 

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Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.

 

Our quarterly operating results may fluctuate significantly because of several factors, including:

 

 

labor availability and costs for hourly and management personnel;

 

profitability of our products, especially in new markets and due to seasonal fluctuations;

 

changes in interest rates;

 

impairment of long-lived assets;

 

macroeconomic conditions, both nationally and locally;

 

negative publicity relating to products we serve;

 

changes in consumer preferences and competitive conditions;

 

expansion to new markets; and

 

fluctuations in commodity prices.

 

If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our industry, or if they change their recommendations regarding our common stock adversely, then the price and trading volume of our common stock could decline.

 

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our industry, or our competitors. Securities and industry analysts do not currently, and may never, publish research on us. If no securities or industry analysts commence coverage of the Company, our stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover the Company change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock would likely decline. If any analyst who may cover the Company were to cease coverage of the Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

 

Changes in laws or, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business, investments and results of operations.

 

We are subject to laws, regulations and rules enacted by national, regional and local governments and Nasdaq. In particular, we are required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations or rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations or rules, as interpreted and applied, could have a material adverse effect on our business and results of operations.

 

We may amend the terms of the warrants in a manner that may be adverse to holders with the approval by the holders of at least 65% of the then-outstanding warrants. As a result, the exercise price of our warrants could be increased, the exercise period could be shortened and the number of shares of common stock purchasable upon exercise of a warrant could be decreased without a warrant holder’s approval.

 

Our warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the warrants in a manner adverse to a holder if holders of at least 65% of the then-outstanding public warrants approve of such amendment. Although our ability to amend the terms of the warrants with the consent of at least 65% of the then-outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares of common stock purchasable upon exercise of a warrant or automatically at our option.

 

Our warrants are exercisable for common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

 

Industrea issued 23,000,000 public warrants as part of its IPO, and simultaneously with the closing of the IPO, Industrea issued 11,100,000 private placement warrants to the Sponsor. Each warrant is exercisable for one share of common stock at $11.50 per share. In connection with the Business Combination, we assumed Industrea’s warrants, and such warrants are exercisable for shares of our common stock. Pursuant to the Offer and Consent Solicitation, on or about April 29, 2019, we issued 2,101,213 shares of common stock in exchange for 9,982,123 public warrants tendered for exchange, and 1,707,175 shares of common stock in exchange for 11,100,000 private placement warrants tendered for exchange. As a result, as of the date of this prospectus, there are 13,017,777 public warrants and no private placement warrants outstanding, respectively. To the extent such warrants are exercised, additional shares of common stock will be issued, which will result in dilution to the holders of common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our common stock.

 

 

 

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We are a holding company with no business operations of our own and we depend on cash flow from our wholly owned subsidiaries to meet our obligations.

 

We are a holding company with no business operations of its own or material assets other than the stock of its subsidiaries, all of which are wholly-owned. All of our operations are conducted by our subsidiaries and as a holding company, we require dividends and other payments from our subsidiaries to meet cash requirements. The terms of any credit facility may restrict our subsidiaries from paying dividends and otherwise transferring cash or other assets to us. If there is an insolvency, liquidation or other reorganization of any of our subsidiaries, our stockholders likely will have no right to proceed against their assets. Creditors of those subsidiaries will be entitled to payment in full from the sale or other disposal of the assets of those subsidiaries before we, as an equityholder, would be entitled to receive any distribution from that sale or disposal. If our subsidiaries are unable to pay dividends or make other payments to us when needed, we will be unable to satisfy our obligations.

 

Anti-takeover provisions contained in the Charter and Bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

 

The Charter contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include:

 

 

a staggered board of directors providing for three classes of directors, which limits the ability of a stockholder or group to gain control of our Board;

 

no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

 

the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board;

 

a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

 

a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by members of our Board, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and

 

advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

 

The Charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

 

The Charter provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or our stockholders, (iii) any action asserting a claim against the Company, our directors, officers or employees arising pursuant to any provision of the DGCL, the Charter or the Bylaws, or (iv) any action asserting a claim against the Company, our directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim (A) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or (C) arising under the Securities Act or for which the Court of Chancery does not have subject matter jurisdiction including, without limitation, any claim arising under the Exchange Act, as to which the federal district court for the District of Delaware shall be the sole and exclusive forum.

 

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Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the provisions of the Charter described in the preceding paragraph. However, stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and such persons. Alternatively, a court may determine that the choice of forum provision is unenforceable. If a court were to find these provisions of the Charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

 

The JOBS Act permits emerging growth companies like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.

 

We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, which we refer to as the “JOBS Act.” As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. As a result, our stockholders may not have access to certain information they deem important. We had revenues during the fiscal year ended October 31, 2018 of approximately $243.2 million. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year (a) following August 1, 2022, the fifth anniversary of the Industrea IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

 

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

We cannot predict if investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result, there may be a less active trading market for securities and our stock price may be more volatile.

 

Risks Related to the Capital Acquisition

 

If we fail to raise sufficient net proceeds from this offering to fund the Capital Acquisition Consideration, and cannot obtain alternative sources of financing, we will be unable to consummate the Capital Acquisition.

 

If we are unable to raise sufficient funds from this offering, we will need to seek alternative sources of financing to fund the Capital Acquisition Consideration. We may not be able to obtain alternative sources of financing sufficient to fund the Capital Acquisition Consideration on terms acceptable to us, if at all. Moreover, no assurance can be provided as to the terms of such alternative financing. If we are unable to obtain sufficient financing, we will be unable to consummate the Capital Acquisition. In such event, we may terminate the Interest Purchase Agreement pursuant to its terms. Furthermore, if the Sellers terminate the Interest Purchase Agreement, under certain circumstances, we may be required to pay the Sellers $5.0 million in cash as liquidated damages in accordance with the terms of the Interest Purchase Agreement. See “The Proposed Capital Acquisition,” below.

 

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Cash expenditures associated with the Capital Acquisition may create significant liquidity and cash flow risks for us.

 

We expect to incur significant transaction costs and some integration costs in connection with the proposed Capital Acquisition. While we have assumed that this level of expense will be incurred, there are many factors beyond our control that could affect the total amount or the timing of the Capital Acquisition and integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. To the extent these Capital Acquisition and integration expenses are higher than anticipated, we may experience liquidity or cash flow issues.

 

Failure to complete the Capital Acquisition could materially and adversely affect our results of operations and the market price of our common stock.

 

Our consummation of the Capital Acquisition is subject to many contingences and conditions, including raising the financing required to pay the Capital Acquisition Consideration. We cannot assure you that we will be able to successfully consummate the Capital Acquisition as currently contemplated or at all. This offering is not contingent upon the consummation of the Capital Acquisition. Risks related to the failure of the proposed Capital Acquisition to be consummated include, but are not limited to, the following:

 

 

we may have raised proceeds from this offering and may not be able to deploy them and realize the same benefits as if the Capital Acquisition had been consummated;

 

we would not realize any of the potential benefits of the transaction, which could have a negative effect on our stock price;

 

we expect to incur, and have incurred, significant fees and expenses regardless of whether the Capital Acquisition is consummated, including due diligence fees and expenses, accounting fees in connection with the preparation of the Capital Companies’ financial statements, and legal fees and expenses;

 

we may experience negative reactions to the Capital Acquisition from customers, clients, business partners, lenders, and employees;

 

the trading price of our common stock may decline to the extent that the current market price of our stock reflects a market assumption that the Capital Acquisition will be completed; and

 

the attention of our management may be diverted to the Capital Acquisition rather than to our own operations and the pursuit of other opportunities that could have been beneficial to us.

 

The occurrence of any of these events individually or in combination could materially and adversely affect our results of operations and the market price of our common stock.

 

If the Capital Acquisition is consummated, the combined company may not perform as we or the market expects, which could have an adverse effect on the price of our common stock.

 

Even if the Capital Acquisition is consummated, the combined company may not perform as we or the market expects. Risks associated with the combined company following the Capital Acquisition include:

 

 

integrating businesses is a difficult, expensive, and time-consuming process, and the failure to integrate successfully our businesses with the business of the Capital Companies in the expected time frame would adversely affect our financial condition and results of operation;

 

the Capital Acquisition will materially increase the size of our operations, and, if we are not able to manage our expanded operations effectively, our common stock price may be adversely affected;

 

it is possible that our key employees or key employees of the Capital Companies might decide not to remain with us after the Capital Acquisition is completed, and the loss of such personnel could have a material adverse effect on the financial condition, results of operations, and growth prospects of the combined company;

 

the ability to realize the expected synergies and anticipated cost savings;

 

the success of the combined company will also depend upon relationships with third parties and the Capital Companies or our pre-existing customers, which relationships may be affected by customer preferences or public attitudes about the Capital Acquisition. Any adverse changes in these relationships could adversely affect the combined company’s business, financial condition, and results of operations; and

 

if government agencies or regulatory bodies impose requirements, limitations, costs, divestitures, or restrictions on the consummation of the Capital Acquisition, the combined company’s ability to realize the anticipated benefits of the Capital Acquisition may be impaired.

 

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The obligations and liabilities of the Capital Companies, some of which may be unanticipated or unknown, may be greater than we have anticipated, which may diminish the value of the Capital Companies to us.

 

The Capital Companies’ obligations and liabilities, some of which may not have been disclosed to us or may not be reflected or reserved for in the Capital Companies’ historical financial statements, may be greater than we have anticipated. The obligations and liabilities of the Capital Companies could have a material adverse effect on the Capital Companies’ business or the Capital Companies’ value to us or on our business, financial condition, or results of operations. Even in cases where we are able to obtain indemnification, we may discover liabilities greater than the contractual limits or the financial resources of the indemnifying party. In the event that we are responsible for liabilities substantially in excess of any amounts recovered through rights to indemnification or alternative remedies that might be available to us, or any applicable insurance, we could suffer severe consequences that would substantially reduce our earnings and cash flows or otherwise materially and adversely affect our business, financial condition, or results of operations.

 

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Use Of Proceeds

 

 

We expect to receive approximately $93.2 million, based on an assumed public offering price of $6.54 per share, the last reported sales price of our common stock on Nasdaq on May 3, 2019 (or approximately $107.2 million if the underwriters’ option to purchase additional shares is exercised in full) of net proceeds from this offering, after deducting underwriting discounts and estimated offering expenses. We currently intend to use the net proceeds from the sale of our common stock in this offering to finance a portion of the Capital Acquisition Consideration, as well as to pay transaction expenses in connection with the Capital Acquisition and related transactions.

 

We, Brundage-Bone and CPHA LLC entered into the Interest Purchase Agreement with ASC, Capital Pumping, MCS, CR LLC, CTCS, A. Crawford and M. Crawford, pursuant to which, subject to the satisfaction or waiver of certain conditions set forth therein, (i) Brundage-Bone will purchase all of the outstanding (x) limited partnership interests in Capital Pumping and ASC from A. Crawford and (y) limited liability company interests in MCS from M. Crawford, and (ii) CPHA LLC will purchase all of the general partnership interests in Capital Pumping and ASC from CR LLC and CTCS, respectively. As a result of the Capital Acquisition, each of the Capital Companies will become our wholly-owned indirect subsidiaries. The consideration for the Capital Acquisition will consist of an aggregate of $129.2 million payable in cash, subject to adjustments as described in the Interest Purchase Agreement.

 

We intend to finance a portion of the Capital Acquisition Consideration with the net proceeds from this offering. We do not know at this time how much of the Capital Acquisition Consideration will be funded through the net proceeds of this offering and the $40.0 million incremental term loan or additional debt financing. There are several variables that could affect the amount of net proceeds we will receive from this offering, including the price at which the shares of common stock will be sold under this offering, the number of shares of common stock that will be sold, and the anticipated transaction expenses and integration costs we expect to incur in connection with the Capital Acquisition. In the event that the net proceeds from this offering are insufficient, or we otherwise determine to do so, we will seek additional financing from a third-party; however, there is no assurance that such financing will be available to us in the amounts, on terms, and at times deemed acceptable to us, if at all. Moreover, if we issue additional debt, we will be more highly leveraged. If we are unable to obtain alternative sources of financing sufficient to pay the Capital Acquisition Consideration, we may be unable to consummate the Capital Acquisition and will either (i) terminate the Interest Purchase Agreement in accordance with its terms or (ii) attempt to negotiate with the Sellers an amendment to the terms of the Interest Purchase Agreement; however, there is no assurance that we will be successful in such negotiations, or that the terms will be deemed acceptable to us. Furthermore, if the Sellers terminate the Interest Purchase Agreement, under certain circumstances, the Company may be required to pay the Sellers $5.0 million in cash as liquidated damages in accordance with the terms of the Interest Purchase Agreement. See “The Proposed Capital Acquisition,” below.

 

In the event that we have proceeds remaining after payment of the Capital Acquisition Consideration and associated transaction expenses and integration costs, which is currently anticipated, we intend to use the proceeds to fund our general corporate working capital needs. This offering is not conditioned upon the consummation of the Capital Acquisition. If the Capital Acquisition is not consummated, we intend to use the proceeds from this offering for general corporate purposes.

 

Our expected use of the net proceeds from this offering represents our current intentions based upon our present plans and business condition, which could change in the future as our plans and business conditions evolve. As of the date of this prospectus, we cannot specify with certainty all of the particular uses of the proceeds from this offering. Accordingly, we will retain broad discretion over the use of such proceeds.

 

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Ticker Symbol Information

 

Our common stock is currently listed on Nasdaq under the symbol “BBCP” and our public warrants are quoted on the OTC Pink marketplace operated by OTC Markets Group, Inc. under the symbol “BBCPW.” As of May 3, 2019, there were 37 holders of record of shares of our common stock and 1 holder of record of our warrants.

 

Dividends

 

The Company has not paid any cash dividends on its common stock to date. It is the present intention of the Company to retain any earnings for use in its business operations and, accordingly, the Company does not anticipate the Board declaring any dividends in the foreseeable future.

 

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Capitalization

 

The following table sets forth our capitalization assumed:

 

 

on an actual basis for the Company as January 31, 2019 and for Capital as of March 31, 2019; and

 

 

on a pro forma as-adjusted basis, after giving effect to (1) the Capital Acquisition (including the borrowing of $40 million under our term loan to finance a portion of the Capital Acquisition and an additional amount of indebtedness of approximately $1.9 million); (2) this offering of 15.0 million shares of common stock at an assumed public offering price of $6.54 per share, based on the last reported sales price of our common stock on Nasdaq on May 3, 2019 (assuming no exercise of the underwriters’ option to purchase additional shares), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and; (3) the Warrant Exchange of approximately 10.0 million public warrants and 11.1 million private placement warrants for approximately 2.1 million and approximately 1.7 million shares of common stock, respectively

 

The as-adjusted information below is illustrative only, and our capitalization following the closing of this offering will be adjusted based on the actual public offering price and other terms of this offering determined at pricing. You should read this information in conjunction with “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company,” the Company’s consolidated financial statements and the related notes appearing elsewhere in this prospectus, “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Capital Companies,” the Capital Companies’ consolidated financial statements and the related notes appearing elsewhere in this prospectus and “Unaudited Pro Forma Condensed Combined Financial Statements.”

 

   

Historical

   

Pro Forma As

Adjusted

 
   

Company

   

Capital Pumping

   

Combined Entity

 
   

(in thousands)

 

Cash and cash equivalents

  $ 4,767     $ 6,690     $ 6,052  
                         

Term loan, net of unamortized deferred financing costs

  $ 337,829     $ 15,360     $ 377,529  

Revolving credit facility, net of unamortized deferred financing costs

    16,071       -       16,071  

Total long-term debt, including current portion

    353,900       15,360       393,600  
                         

Zero-dividend redeemable convertible preferred stock

    25,000       -       25,000  
                         

Common Stock, par value $0.0001 per share (500,000,000 shares authorized; 28,847,707 shares issued and outstanding, actual; and 47,656,427 shares issued and outstanding, on pro forma as-adjusted basis)

    3       -       5  

Common stock issuance, net issuance costs

    -       -       93,195  

Partner's Capital

    -       35,923       -  

Stockholders' equity

    246,613       -       337,398  

Total stockholders' and owners' equity

  $ 246,613     $ 35,923     $ 337,398  
                         

Total capitalization

  $ 625,513     $ 51,283     $ 730,998  

 

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The actual number of shares of our common stock outstanding used is based on 28,847,707 shares of our common stock outstanding as of January 31, 2019 and excludes as of such date: (i) 7,700,000 shares of common stock reserved for issuance under the 2018 Plan and (ii) 2,783,479 shares of common stock issuable upon exercise of outstanding stock options granted pursuant to the 2018 Plan at a weighted average exercise price of $1.48 per share, (iii) 34,100,000 shares of common stock underlying outstanding warrants to purchase shares of our common stock, which was subsequently reduced to 13,017,777 warrants outstanding after the completion of the warrant exchange, each with an exercise price of $11.50 per share and (iv) the issuance of 15,000,000 shares of our common stock pursuant to this offering.

 

The pro forma number of shares of our common stock outstanding used is based on 28,847,707 shares of our common stock outstanding as of January 31, 2019 and excludes as of such date: (i) 7,700,000 shares of common stock reserved for issuance under the 2018 Plan and (ii) 2,783,479 shares of common stock issuable upon exercise of outstanding stock options granted pursuant to the 2018 Plan at a weighted average exercise price of $1.48 per share, and (iii) 13,017,777 shares of common stock underlying outstanding warrants to purchase shares of our common stock, each with an exercise price of $11.50 per share.

 

A $1.00 increase or decrease in the assumed offering price of $6.54 per share of common stock (which was the last reported sales price per share of our common stock on Nasdaq on May 3, 2019) would increase or decrease, respectively, each of total stockholder’ equity, and total capitalization by approximately $15.0 million, assuming that the assumed offering of 15,000,000 shares of common stock remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

 

 

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Dilution

 

If you purchase shares of our common stock in this offering, your ownership interest will experience immediate book value dilution to the extent the public offering price per share exceeds our as adjusted net tangible book value per share immediately after this offering.

 

 

Our net tangible book value at January 31, 2019 was $55.8 million, or $1.94 per share based on the number of shares outstanding as of such date. Net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the number of shares of common stock outstanding as of January 31, 2019. After giving effect to our sale of 15,000,000 shares of common stock in this offering at an assumed public offering price of $6.54 per share, the last reported sales price of our common stock on Nasdaq on May 3, 2019, and after deducting underwriting discounts and estimated offering expenses payable by us, our as adjusted net tangible book value at January 31, 2019 would have been approximately $154.1 million, or $3.51 per share. Therefore, under those assumptions this offering would result in an immediate increase in the net tangible book value of $1.57 per share to our existing stockholders, and immediate dilution of $3.03 per share in the net tangible book value to new investors. Dilution per share to new investors is determined by subtracting (i) the pro forma net tangible book value per share as of January 31, 2019 after this offering from (ii) the assumed public offering price per share paid by new investors. The following table illustrates this dilution on a per-share basis:

 

 

 

Assumed public offering price per share paid by new investors

          $ 6.54  

Net tangible book value per share as of January 31, 2019, before this offering

  $ 1.94          

Increase in net tangible book value per share attributable to this offering

    1.57          

Pro forma net tangible book value per share as of January 31, 2019, after this offering

            3.51  

Dilution in net tangible book value per share to new investors

          $ 3.03  

 

 

If the underwriters exercise their option to purchase additional shares from us in full, the as adjusted net tangible book value after giving effect to this offering would be $3.66 per share. This represents an increase in net tangible book value of $1.72 per share to existing stockholders and dilution of $2.88 per share to new investors.

 

A $1.00 increase (decrease) in the assumed public offering price of $6.54 per share, the last reported sales price of our common stock on Nasdaq on May 3, 2019, would increase (decrease) our pro forma net tangible book value by $30.0 million, or $0.35 per share, and the dilution to new investors by $0.66 per share, assuming no change to the number of shares offered by us as set forth on the cover of this prospectus, and after deducting underwriting discounts and estimated offering expenses.

 

The information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering, as determined between us and the underwriters at pricing.

 

 

 

 

 

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Management’s Discussion And Analysis Of Financial Condition
And Results Of Operations Of The Company

 

You should read the following discussion and analysis together with our consolidated financial statements and related notes included elsewhere in this prospectus. Among other things, those historical consolidated financial statements include more detailed information regarding the basis of presentation for the financial data than are included in the following discussion. This discussion contains forward-looking statements about our business, operations, and industry that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations, and intentions. Our future results and financial condition may differ materially from those that we currently anticipate as a result of the factors described in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

 

Business Overview 

 

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”), Eco-Pan, Inc. (“Eco-Pan”), and Camfaud Group Limited (“Camfaud”).

 

On December 6, 2018, the Company, formerly known as Concrete Pumping Holdings Acquisition Corp., consummated the previously announced business combination transaction (the “Business Combination”) pursuant to which it acquired (i) the private operating company formerly called Concrete Pumping Holdings, Inc. (“CPH”) and (ii) the former special purpose acquisition company called Industrea Acquisition Corp (“Industrea”). In connection with the closing of the Business Combination, the Company changed its name to Concrete Pumping Holdings, Inc.  The financial results described herein for the dates and periods prior to the Business Combination relate to the operations of CPH prior to the consummation of the Business Combination.

 

U.S. & U.K. Concrete Pumping

 

Brundage-Bone and Camfaud are concrete pumping service providers in the United States and United Kingdom (“U.K.”), respectively. Their core business is the provision of concrete pumping services to general contractors and concrete finishing companies in the commercial, infrastructure and residential sectors. Most often equipment returns to a “home base” nightly and neither company contracts to purchase, mix, or deliver concrete. Brundage-Bone has 80 branch locations across 22 states with its corporate headquarters in Denver, Colorado. Camfaud has 28 branch locations throughout the U.K., with its corporate headquarters in Epping (near London), England. 

 

In April 2018, Brundage-Bone completed the acquisition of substantially all assets of Richard O’Brien Companies, Inc., O’Brien Concrete Pumping-Arizona, Inc., O’Brien Concrete Pumping-Colorado, Inc. and O’Brien Concrete Pumping, LLC (collectively, “O’Brien” or the “O’Brien Companies”), solidifying Brundage-Bone’s presence in the Colorado and Phoenix, Arizona markets.

 

Concrete Waste Management Services — Eco-Pan (Eco-Pan) 

 

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 14 operating locations across the United States with its corporate headquarters in Denver, Colorado.

 

Recent Developments

 

On March 18, 2019, the Company, Brundage-Bone and CPHA LLC entered into an Interest Purchase Agreement pursuant to which Brundage-Bone and CPHA LLC agreed to acquire all of the outstanding equity interests of Capital Pumping LP and its affiliates for $129.2 million in an all-cash transaction. The acquisition is expected to close promptly following the closing of this offering, subject to regulatory approvals and other customary closing conditions. On March 26, 2019, the Federal Trade Commission granted early termination of the waiting period under the HSR Act with respect to the Capital Acquisition. The Company expects to finance the Capital Acquisition through this offering and additional borrowings under its Term Loan Agreement.

 

On March 26, 2019, the Company and certain of its affiliates entered into an Amendment No. 1 to Term Loan Agreement, with Stifel Bank & Trust (“Stifel”) and Credit Suisse AG, Cayman Islands Branch (the “Administrative Agent”), pursuant to which Stifel and certain other lenders agreed to provide, subject to satisfaction of customary closing conditions, including the closing of the Capital Acquisition, incremental term loans in an aggregate amount up to $40 million (the “Amendment No. 1 Term Loans”), which shall be borrowed under, and have substantially the same terms as the term loans previously borrowed under, the Term Loan Agreement, dated as of December 6, 2018, by and among the Company, certain of its affiliates, the Administrative Agent and each lender party thereto from time to time, for the purpose of financing a portion of the consideration payable for the Capital Acquisition and fees and expenses in connection therewith and in connection with the Amendment No. 1 Term Loans. Concurrently with this offering, we may seek to incur additional debt to finance the Capital Acquisition.

 

On April 1, 2019, we commenced (i) an offer to each holder of our public warrants and private placement warrants that were issued in connection with Industrea’s initial public offering on April 17, 2017 (the “IPO”) the opportunity 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 placement warrant tendered pursuant to the offer (the “Offer” or "Warrant Exchange"), and (ii) the solicitation of consents (the “Consent Solicitation”) from holders of the public warrants to amend the Warrant Agreement, dated as of July 26, 2017, by and between the Company and Continental Stock Transfer & Trust Company, which governs all of the warrants, to permit us to require that each warrant that is outstanding upon the closing of the Offer be converted into 0.1895 shares of common stock. The Offer and Consent Solicitation expired at 11:59 p.m., Eastern Daylight Time, on April 26, 2019. 9,982,123 public warrants, including 9,440 public warrants subject to notice of guaranteed delivery, and 11,100,000 private placement warrants were tendered for exchange pursuant to the Offer and Consent Solicitation. On April 29, 2019, we issued 2,101,213 shares of common stock in exchange for the tendered public warrants and 1,707,175 shares of common stock in exchange for the tendered private placement warrants. Because consents were not received from holders of more than 65% of the public warrants, the Warrant Agreement amendment was not approved and the Warrant Agreement will remain unchanged. As a result, the Company has 40,214,153 shares of common stock and 13,017,777 public warrants outstanding as of the date of this prospectus.

 

On April 15, 2019, the Company acquired Atlas Concrete Pumping Inc. (“Atlas”), a provider of concrete pumping services in Idaho, for a purchase price of approximately $3.8 million, payable in cash and common stock. 

 

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Results of Operations 

 

Consolidated Results of Operations for the three years ended October 31, 2018, 2017 and 2016

 

Revenue

 

We generate revenue from Brundage-Bone, Camfaud, and Eco-Pan businesses each of which are described below:

 

U.S. Concrete Pumping — Brundage-Bone: Revenue consists primarily of fees charged to customers for concrete pumping services and parts Brundage-Bone sells to other concrete pumping companies. Brundage-Bone charges customers a rate based on the hours the equipment is deployed on jobs, yards of concrete pumped and surcharges (such as for fuel) when appropriate. As Brundage-Bone never takes ownership of the concrete, Brundage-Bone is not responsible for billing the customers for the material that Brundage-Bone pumps on jobsites. The customer sources this separately. Brundage-Bone bills solely for services when rendered and is not subject to percentage of completion accounting for any of its revenues. Brundage-Bone has experienced minimal bad debt expense, averaging less than 1% of revenue on an annual basis.

 

U.K. Concrete Pumping — Camfaud: Revenue consists primarily of fees charged to customers for concrete pumping services. Camfaud’s mobile concrete pumping business is very similar to that of Brundage-Bone. Camfaud’s static concrete pumping business either entails Camfaud providing pumping service utilizing static line pumps with an accompanied operator, or renting out the static pumping equipment without an operator.

 

Mobile equipment is charged to customers under a minimum hire rate. This is typically based on a minimum hire period of between 5 hours and 8 hours. An additional charge to the customer is made in accordance with agreed fees when the customer exceeds the minimum hire period. Static equipment is charged to customers based on a minimum weekly (or fortnightly) hire. The static equipment is typically charged to customers over a minimum period of one week due to the small size of the equipment provided.

 

As Camfaud never takes ownership of the concrete, Camfaud is not responsible for billing the customers for the material that Camfaud pumps on jobsites. The customer sources this separately. Camfaud invoices solely for services when rendered and is not subject to percentage of completion accounting for any of its revenues. Camfaud has experienced minimal bad debt expense, averaging less than 1% of revenue on an annual basis.

 

Concrete Waste Management Services — Eco-Pan: Revenue primarily consists of fees charged to customers for the delivery of pans and containers to jobsites and the disposal of the concrete waste material. Eco-Pan charges customers a delivery fee and a service fee for the use of Eco-Pan’s proprietary pans and containers, disposal fees for the disposal of the concrete waste material, and a fuel surcharge. Eco-Pan bills for services when rendered. Eco-Pan also charges additional fees for material placed in the pans and containers that does not conform to Eco-Pan’s requirements, pans that are damaged by the customer, and for pans and containers that are kept by customers beyond the agreed initial rental period.

 

Cost of Operations

 

U.S. Concrete Pumping — Brundage-Bone

 

Brundage-Bone’s cost of operations consists primarily of wages and benefits for concrete pump operators and mechanics, parts, repair and maintenance, fuel, insurance and depreciation.

 

Wages and benefits: approximately 45% to 48% of Brundage-Bone’s total cost of operations represents hourly wages paid to pump operators and maintenance personnel, incentive bonuses, plus union fees and payroll taxes that are costs of operations driven by both hours billed to customers and the hourly wage rate paid to Brundage-Bone’s employees.

 

Parts, repairs and maintenance: approximately 17% to 19% of Brundage-Bone’s total cost of operations represents the costs for outside repair and maintenance on equipment, and parts and supplies that are used in repairing and maintaining Brundage-Bone’s fleet. These items are driven by fleet size and the age and the utilization levels of Brundage-Bone’s rolling stock equipment.

 

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Fuel costs: approximately 9% of Brundage-Bone’s total cost of operations reflects fuel costs incurred through the round-trip transit to jobsites and from powering, the pumping of concrete through specialized equipment. The impact of fuel price changes on Brundage-Bone’s operating performance is mitigated to the extent Brundage-Bone is able to pass through fuel charges to customers pursuant to agreed arrangements, although the changes in amounts paid by customers tend to lag behind increasing fuel price changes. Brundage-Bone maintains these pass-through arrangements on a substantial majority of its jobs.

 

Insurance costs: approximately 6% of Brundage-Bone’s total cost of operations includes property, casualty, liability, and worker’s compensation and health insurance premiums. These expenses are variable within Brundage-Bone’s cost of operations and scale with revenues, fleet count and aggregate employment levels. Brundage-Bone is self-insured up to an agreed deductible on some policies, and has established reserves for estimated claims incurred but not reported.

 

Depreciation: approximately 13% to 18% of Brundage-Bone’s total cost of operations reflects the depreciation on the rolling stock fleet. Other costs of operations include licenses and permit costs, freight, equipment movement and other costs of operations that are driven by employment and fleet utilization levels.

 

U.K. Concrete Pumping — Camfaud

 

Camfaud’s cost of operations consists primarily of wages and benefits for concrete pump operators and mechanics, parts, repair and maintenance, fuel, insurance and depreciation.

 

Wages and benefits: approximately 52% to 53% of Camfaud’s total costs of operations represents hourly wages paid to pump operators and maintenance personnel, plus payroll taxes and pension contributions. Operators are paid an hourly rate based on a contractual minimum 40-hour week. Operators are incentivized to supplement their hourly rate through discretionary performance bonuses, which are awarded by securing targets such as safety, attendance and maintenance of pump equipment. We believe this structure encourages good team morale and low employee turnover.

 

Parts, repairs and maintenance: approximately 14% to 17% of Camfaud’s total cost of operations represents the costs for outside repair and maintenance on Camfaud’s equipment, and consumable parts and supplies that are used in repairing and maintaining Camfaud’s fleet.

 

Fuel: approximately 8% to 10% of Camfaud’s total operations is driven by the deployment levels of Camfaud’s fleet, as well as the cost per gallon of diesel fuel. Camfaud incurs fuel costs through the round-trip transit to jobsites and from powering the pumping of concrete through specialized equipment. Camfaud fuels most trucks at Camfaud’s depot locations, which are secured by formal (and informal) rental agreements in areas throughout the U.K. The impact of increasing fuel price changes on Camfaud’s operating performance is mitigated to the extent Camfaud is able to pass through fuel charges to customers pursuant to agreed arrangements, although the changes in amounts paid by customers tend to lag behind increasing fuel price changes. Camfaud maintains these pass-through arrangements on a substantial majority of its jobs.

 

Insurance costs: approximately 3% of Camfaud’s total cost of operations includes property, casualty, liability, and worker’s compensation and health insurance premiums. These expenses are variable within Camfaud’s cost of operations and scale with revenues, fleet count and aggregate employment levels. Camfaud is self-insured up to an agreed deductible on certain policies.

 

Depreciation: approximately 13% to 18% of Camfaud’s total cost of operations reflects the depreciation on the rolling stock fleet. Other costs of operations include licenses and permit costs, freight, equipment movement and other costs of operations that are driven by employment and fleet utilization levels.

 

Concrete Waste Management Services — Eco-Pan

 

Eco-Pan’s cost of operations consists primarily of wages for truck operators, parts, repair and maintenance, fuel, insurance, disposal fees, and depreciation.

 

Wages and benefits: approximately 41% to 43% of Eco-Pan’s total cost of operations represents hourly wages, incentive bonuses, payroll taxes, benefits, and health insurance for truck operators and maintenance personnel.

 

Parts, repairs and maintenance: approximately 14% to 16% of Eco-Pan’s total cost of operations represents the costs for parts, supplies, outside repairs and maintenance used to maintain Eco-Pan’s fleet of trucks.

 

Fuel cost: approximately 9% to 11% of Eco-Pan’s total cost of operations represent fuel used in Eco-Pan’s trucks. Eco-Pan incurs fuel costs through round-trip travel to deliver and pick-up pans and containers. Eco-Pan’s trucks return to Eco-Pan’s home yard every evening. Eco-Pan charges fuel surcharges to customers, thereby mitigating the impact of rising fuel prices. Eco-Pan’s trucks fuel at off-site commercial fueling stations.

 

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Depreciation: approximately 8% to 11% of Eco-Pan’s total cost of operations reflects the depreciation of Eco-Pan’s fleet of trucks used of deliver and pick-up pans and containers.

 

Disposal fees: approximately 10% of Eco-Pan’s total cost of operations represents costs incurred when Eco-Pan disposes of the material in pans and containers at approved disposal sites. Eco-Pan passes these fees through pricing to Eco-Pan’s customers.

 

Insurance costs: approximately 9% to 10% of Eco-Pan’s total cost of operations includes commercial insurance and health insurance expenses. Eco-Pan’s health insurance plan is under the same structure as Brundage-Bone’s plan. Other costs of operations include miscellaneous taxes, license, and permit costs.

 

General and Administrative Expenses

 

Our general and administrative expenses include fixed costs related primarily to salaries and benefits for corporate personnel, branch management and administrative staff, expenses related to auto leases, depreciation and amortization costs on non-pumping assets, pickup trucks and office equipment, and other fixed costs related to operations including but not limited to rent and other fixed overhead expenses. These expenses also include accounting, legal and other professional service fees, facility costs, and bad debt expenses. We expect to continue to invest in corporate infrastructure and incur further expenses related to being a public company, including increased accounting and legal costs, investor relations costs, increased insurance premiums and other compliance costs associated with Section 404 of the Sarbanes-Oxley Act. As a result, we anticipate that general and administrative expenses will increase in future periods.

 

Transaction Costs

 

Transaction costs include expenses for legal, accounting, and other professionals that were engaged in the completion of an acquisition.

 

Income Tax (Benefit) Provision

 

Provision for income taxes consists primarily of federal and state income taxes in the United States and income taxes in foreign jurisdictions in which we conduct business.

 

EBITDA

 

Our consolidated and segment EBITDA is calculated as Net income before subtracting Income tax expense (benefit), Depreciation and amortization, and Interest expense (income). Please refer to Note 17 Segment Reporting in the consolidated financial statements included elsewhere in this prospectus for the components of the aforementioned items by segment. Consolidated EBITDA is a non-GAAP financial measure and should not be considered in isolation or as a substitute for performance measures calculated under GAAP (See “Non-GAAP Measures (Adjusted EBITDA)” below).

 

Comparison of the Years Ended October 31, 2018 and October 31, 2017

 

Revenue

 

Year Ended October 31,

 

 

2017 to 2018

 

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

Statement of operations information:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Concrete Pumping - Brundage-Bone

 

$

164,305,836

 

 

$

151,194,931

 

 

$

13,110,905

 

 

 

8.7

%

U.K. Concrete Pumping - Camfaud

 

 

50,448,085

 

 

 

36,433,763

 

 

 

14,014,322

 

 

 

38.5

%

Concrete Waste Management Services - Eco-Pan

 

 

28,469,346

 

 

 

23,581,905

 

 

 

4,887,441

 

 

 

20.7

%

Revenue

 

$

243,223,267

 

 

$

211,210,599

 

 

$

32,012,668

 

 

 

15.2

%

 

U.S. Concrete Pumping — Brundage-Bone

 

Brundage-Bone revenue totaled approximately $164.3 million for the fiscal year ended October 31, 2018 compared to $151.2 million in the 2017 comparative period, representing an increase of 8.7%. The increase in revenue in 2018 was largely due to positive construction momentum in the first half of the year primarily in the West and Central regions in the U.S. Several markets in the West Region had more favorable winter conditions in the 2018 period as compared to the 2017 comparative period.

 

West region revenue increased due to contributions from operations in Washington and Oregon which increased by 29.6% or $3.6 million and 9.9% or $1.2 million, respectively, during the year ended October 31, 2018 as compared to the 2017 comparative period primarily due to a 29.1% or $3.6 million and 5.8% or $1.2 million increase in billed hours, respectively, due to favorable weather conditions. These higher levels of operational activity in the West region were partially offset by 17.6% lower billed hour volume in California and a $1.1 million revenue decrease due to lower levels of pumping activity. The California revenue decrease is attributable to heavy snow and rainfall during the year ended October 31, 2018 as compared to the 2017 comparative period slowing down overall construction activity.

 

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Table of Contents

 

Central region revenue increased by 20.2% or $6.0 million during the year ended October 31, 2018 as compared to the 2017 comparative period. The Central region was positively impacted by healthy growth in the energy sector primarily in West Texas. West Texas revenue increased by 28.8% or $1.4 million during the year ended October 31, 2018 as compared to the comparable 2017 period. Further, revenue increased by $5.2 million or 27.6% in Colorado. The increase in revenue is due primarily to the O’Brien acquisition whereby we acquired additional presence in the Colorado market with the aforementioned acquisition which translated to a revenue increase for the year ended October 31, 2018 as compared to the 2017 period. The revenue increases in West Texas were partially offset by a revenue decrease of 8.5% or $0.5 million in Wichita, Kansas due to harsh weather conditions during the year ended October 31, 2018 as compared to the 2017 comparative period.

 

The Mountain and Southeast regions were consistent with revenue increases of 10.1% or $2.5 million and 10.1% or $2.7 million, respectively.

 

The South region experienced a decrease in revenue attributable to the Houston branch where revenue decreased by 22.0% or $1.7 million during the year ended October 31, 2018 as compared to the 2017 comparative period. The decrease in Houston was due to the overall impact of Hurricane Harvey whereby it took several months of disaster clean up and repairs to take place before the Houston economy was able to fully recover.

 

Parts revenue totaled $3.1 million for the years ended October 31, 2018 and 2017, respectively

 

U.K. Concrete Pumping — Camfaud

 

Camfaud revenue totaled approximately $50.4 million in the year ended October 31, 2018 compared to $36.4 million in the comparable 2017 period representing an increase of 38.5% This increase was primarily driven by incremental revenue from the Reilly acquisition and the inclusion of financial operating results for a full year of operations as opposed to the comparable prior period which had 15 fewer operating days. These two factors were responsible for contributions of $7.7 million to the Camfaud revenue total.

 

The remaining $6.3 million of growth is attributed to an increasing market share in the United Kingdom. Camfaud revenue is consistently split with approximately 80% of total revenues generated from the mobile pumping business and 20% generated from the static pumping and other businesses.

 

Concrete Waste Management Services — Eco-Pan

 

Eco-Pan revenue totaled $28.5 million for the year ended October 31, 2018 compared to $23.6 million in the 2017 comparative period, representing an increase of 20.7% or $4.9 million. Eco-Pan continues to experience strong growth in the adoption of its route-based environmental disposal service, as market demand for a premier concrete washout recycling solution continues to grow. The growth in Eco-Pan demand is driven by two primary factors: 1) Construction industry general contractors and other customers realizing that Eco-Pan is a cost effective and environmentally compliant alternative compared to legacy industry solutions and 2) significantly higher enforcement, fines and penalties levied by the Environmental Protection Agency (EPA) and state authorities for violations of the Clean Water Act. As a result, Eco-Pan has been able to secure more market share and drive a substantial volume of growth.

 

Eco-Pan’s largest markets are generally in the Western region of the U.S. Revenue increased in Utah by 33.3% or $0.9 million during the year ended October 31, 2018 as compared to the comparable 2017 period. Revenue in Washington increased by 18.9% or $1.0 million during the year ended October 31, 2018 as compared to the comparable 2017 period. Revenue in California increased by 14.7% or $0.7 million during the year ended October 31, 2018 as compared to the 2017 comparative period. Revenue in Idaho increased 45.7% or $0.2 million. Revenue in Colorado increased by 4.4% or $0.2 million during the year ended October 31, 2018 as compared to the 2017 comparative period. Revenue in Texas increased by 52.2% or $0.9 million. The remaining increase in revenue was attributable to the various other markets in which Eco-Pan conducts business. Only a single Eco-Pan market (Oklahoma) experienced a substantial decrease in revenue of greater than 5% during the year ended October 31, 2018 as compared to the comparable 2017 period. Revenue in Oklahoma decreased 14.0% which was an immaterial decrease on a per dollar basis.

 

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Table of Contents

 

Gross Margin

 

The Company’s gross margin for the year ended October 31, 2018 was 43.7%, up 120 basis points from 42.5% in the year ended October 31, 2017. The improvement was primarily by driven by a $3.0 million year-over-year decrease in depreciation expenses in Brundage-Bone segment that was a result of several assets becoming fully depreciated before or during the year ended October 31, 2018.

 

General and Administrative Expenses

 

Year Ended October 31,

 

 

2017 to 2018

 

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

Statement of operations information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Concrete Pumping - Brundage-Bone

 

$

40,201,822

 

 

$

36,707,978

 

 

$

3,493,844

 

 

 

9.5

%

U.K. Concrete Pumping - Camfaud

 

 

13,371,452

 

 

 

9,799,143

 

 

 

3,572,309

 

 

 

36.5

%

Concrete Waste Management Services - Eco-Pan

 

 

7,334,117

 

 

 

7,635,512

 

 

 

(301,395

)

 

 

-3.9

%

Corporate

 

 

(2,118,375

)

 

 

(1,277,723

)

 

 

(840,652

)

 

 

65.8

%

General and Administrative Expenses

 

$

58,789,016

 

 

$

52,864,910

 

 

$

5,924,106

 

 

 

11.2

%

 

Transaction Costs

 

Year Ended October 31,

 

 

2017 to 2018

 

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

Statement of operations information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Concrete Pumping - Brundage-Bone

 

$

7,589,825

 

 

$

4,489,517

 

 

$

3,100,308

 

 

 

69.1

%

U.K. Concrete Pumping - Camfaud

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Concrete Waste Management Services - Eco-Pan

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Transaction Costs

 

$

7,589,825

 

 

$

4,489,517

 

 

$

3,100,308

 

 

 

69.1

%

 

U.S. Concrete Pumping — Brundage-Bone

 

General and administrative expenses were $40.2 million for the year ended October 31, 2018 compared to $36.7 million for the comparative period ended in fiscal 2017, representing an increase of $3.5 million. General and administrative expenses included depreciation and amortization expense of $3.3 million and $3.3 million for the years ended October 31, 2018, and October 31, 2017, respectively. Depreciation expense was flat from period to period. Amortization expense was flat for the year ended October 31, 2018 as compared to the comparative period ended in fiscal 2017 due to new amortization expense attributable to the O’Brien acquisition that offset expected decreases in amortization expense due to continued amortization of existing intangibles. Included in general and administrative expenses were $2.5 million and $1.6 million of property rent paid to a related company and $4.3 million and $1.7 million of management fees paid to Brundage-Bone’s primary shareholder for the years ended October 31, 2018 and 2017, respectively. Wages and benefits increased by $0.7 million or 4.2% to 11.1% of revenue for the year ended October 31, 2018. This increase was primarily due to increases in bonus compensation offset by decreases in stock option compensation. Increases in management fees for the year ended October 31, 2018 were partially offset by decreases in other general and administrative expenses during the same period including decreases on automotive expenses, increases on gains for the sale of assets, use taxes and other miscellaneous expenses.

 

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Table of Contents

 

Transaction costs totaled $7.6 million in the year ended October 31, 2018, and primarily related to the cost associated with the potential acquisition of CPH by the Company and the O’Brien asset purchase completed on April 20, 2018. These costs compared to $4.5 million in the comparative period in fiscal 2017 that related to the Camfaud acquisition. Transaction costs represented expenses for legal, accounting, and other professionals that were engaged in the completion of the purchase and sale of CPH.

 

U.K. Concrete Pumping — Camfaud

 

Camfaud’s general and administrative costs for the year ended October 31, 2018 of $13.4 million were 36.5% higher than in the comparative period in fiscal 2017, largely due to the impact of fair value adjustments on the earn-out liability associated with the Camfaud acquisition and the Reilly acquisitions and increased amortization expense. The earn-out liability contributed approximately $0.5 million of expense for the period ended October 31, 2018 as compared to the comparable period in fiscal 2017. General and administrative costs included fixed costs related primarily to wages and benefits for administrative personnel and other fixed costs related to Camfaud’s operations.

 

Concrete Waste Management Services — Eco-Pan

 

Eco-Pan’s general and administrative expenses were $7.3 million for the year ended October 31, 2018, compared to $7.6 million for the comparative period in fiscal 2017, representing a decrease of 3.9% or $0.3 million. General and administrative expenses included depreciation and amortization expense of approximately $1.2 million and $1.5 million for the years ended October 31, 2018 and October 31, 2017, respectively. Wages and benefits in general and administrative expenses increased by approximately $0.1 million in the year ended October 31, 2018, as Eco-Pan invested in additional sales personnel.

 

Corporate

 

General and administrative expenses were ($2.1) million for the year ended October 31, 2018, compared to ($1.3) million for the comparative period in fiscal 2017, representing a change of 66% or $0.8 million. These amounts relate to the elimination of intercompany rent expense. There was a $0.8 million increase in intercompany rental expense. This increase was due to a rental rate increase that went into effect in September 2017 that has been reflected in the year ended October 31, 2018.

 

Income from operations

 

Year Ended October 31,

 

 

2017 to 2018

 

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

Statement of operations information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Concrete Pumping - Brundage-Bone

 

$

19,905,022

 

 

$

19,176,349

 

 

$

728,673

 

 

 

3.8

%

U.K. Concrete Pumping - Camfaud

 

 

7,694,085

 

 

 

4,377,509

 

 

 

3,316,576

 

 

 

75.8

%

Concrete Waste Management Services - Eco-Pan

 

 

10,250,064

 

 

 

7,573,092

 

 

 

2,676,973

 

 

 

35.3

%

Corporate

 

 

2,118,375

 

 

 

1,277,723

 

 

 

840,652

 

 

 

65.8

%

Income from operations

 

$

39,967,546

 

 

$

32,404,673

 

 

$

7,562,873

 

 

 

23.3

%

 

U.S. Concrete Pumping — Brundage-Bone

 

As a result of the factors discussed above, income from operations was $19.9 million for the year ended October 31, 2018, compared to $19.2 million for the comparative period in fiscal 2017, representing an increase of $0.7 million, or approximately 3.8%. The 2018 period included higher transaction costs as previously described due to the acquisition of CPH by the Company and the O’Brien asset purchase. This accounted for approximately $3.1 million of the charge against income from operations of the year ended October 31, 2018 as compared to the comparable period in fiscal 2017. The additional charge against income as described above was due to increases management fees paid and higher wages and benefits expense. Improvement in income from operations was due to the effect of increased gains on the sale of property, plant and equipment of $1.4 million for the year ended October 31, 2018.

 

The remaining increase in operating income was related to higher utilization and improved profitability as described in previous sections.

 

U.K. Concrete Pumping — Camfaud

 

Income from operations increased by approximately 75.8% to $7.7 million in the year ended October 31, 2018 compared to $4.4 million in the comparative period in fiscal 2017. Operating margin increased to 15.3% compared with 12.0% in the comparable period in fiscal 2017. The increase was due to increased revenue as a result of the Reilly acquisition while maintaining the same expense levels for general and administrative costs in the year ended October 31, 2018.

 

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Table of Contents

 

Concrete Waste Management Services — Eco-Pan

 

Income from operations increased by approximately 35.3% to $10.3 million in the year ended October 31, 2018, compared to $7.6 million in the comparative period in fiscal 2017. Operating margin increased to 36.0%, compared with 32.1% in the comparable period in fiscal 2017. The increase was due to higher volume of sales consistent gross profit margin and the ability to maintain stable general and administrative costs, which contributed to the increased overall margin contribution.

 

 Corporate

 

See discussion above regarding the elimination of intercompany rent expense.

 

Other (Expense) / Income

 

Year Ended October 31,

 

 

2017 to 2018

 

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

Statement of operations information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Concrete Pumping - Brundage-Bone

 

$

(17,192,284

)

 

$

(24,238,203

)

 

$

7,045,919

 

 

 

-29.1

%

U.K. Concrete Pumping - Camfaud

 

 

(4,172,959

)

 

 

(3,521,397

)

 

 

(651,562

)

 

 

18.5

%

Concrete Waste Management Services - Eco-Pan

 

 

(1,023

)

 

 

24,864

 

 

 

(25,887

)

 

 

-104.1

%

Corporate

 

 

(3,558

)

 

 

-

 

 

 

-

 

 

 

-

 

Other (Expense) / Income

 

$

(21,369,824

)

 

$

(27,734,736

)

 

$

6,368,470

 

 

 

-23.0

%

 

Other (Expense)/Income is comprised of interest expense, loss on debt extinguishment, and miscellaneous other income.

 

U.S. Concrete Pumping — Brundage-Bone

 

Other (expense) / income was $17.2 million for the year ended October 31, 2018 compared to $24.2 million in the comparative period in fiscal 2017, representing a decrease of $7.0 million. The decrease was due to two factors. The first was a decrease in the Company’s interest expense due to the modification of its prior debt facilities in September 2017 that provided for lower interest rates for which the benefit was picked up in fiscal year 2018. The other primary driver of the decrease in Other (expense) / income is due to $5.2 million of debt extinguishment costs for the year ended October 31, 2017 that did not occur during the comparable period in fiscal 2018.

 

U.K. Concrete Pumping — Camfaud

 

Other (expense) / income was $4.2 million for the year ended October 31, 2018 compared to $3.5 million in the comparative period in fiscal 2017, representing an increase of $0.7 million. Other (expense) / income also included approximately $0.4 million in connection with interest accrued on Seller loan notes for the Camfaud and Reilly acquisitions accruing at 5% annually for the year ended October 31, 2018. The increase in Other (expense) / income was related to the larger debt balance maintained by Camfaud.

 

Concrete Waste Management Services — Eco-Pan

 

Other (expense) / income was minimal for the years ended October 31, 2018 and October 31, 2017.

 

Corporate

 

The Corporate segment’s other (expense) / income was minimal for the years ended October 31, 2018 and October 31, 2017.

 

Income Tax (Benefit) Expense

 

Year Ended October 31,

 

 

2017 to 2018

 

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

Statement of operations information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Concrete Pumping - Brundage-Bone

 

$

(11,472,368

)

 

$

3,109,635

 

 

$

(14,582,003

)

 

 

-468.9

%

U.K. Concrete Pumping - Camfaud

 

 

502,974

 

 

 

245,424

 

 

 

257,550

 

 

 

104.9

%

Concrete Waste Management Services - Eco-Pan

 

 

845,572

 

 

 

2,791,138

 

 

 

(1,945,566

)

 

 

-69.7

%

Corporate

 

 

339,702

 

 

 

(2,389,539

)

 

 

2,729,241

 

 

 

-114.2

%

Income Tax (Benefit) Expense

 

$

(9,784,120

)

 

$

3,756,658

 

 

$

(13,540,778

)

 

 

-360.4

%

 

46

Table of Contents

 

U.S. Concrete Pumping — Brundage-Bone

 

Brundage-Bone’s estimate of income tax benefit for the year ended October 31, 2018 of $11.5 million increased by $14.6 million compared to the income tax expense of $3.1 million in the comparable period in fiscal 2017, largely because of changes due to recent U.S. tax reform. In December 2017, the Tax Cuts and Jobs Act was enacted. The 2017 Tax Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35 percent to 21 percent effective January 1, 2018. In accordance with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of ASC Topic 740, the Company recognized the income tax effects of the 2017 Tax Act in its consolidated financial statements in the period the 2017 Tax Act was signed into law. As such, the Company’s consolidated financial statements for the period ended October 31, 2018 reflect the income tax effects of the 2017 Tax Act for which the accounting is complete and provisional amounts for those specific income tax effects for which the accounting is incomplete but a reasonable estimate could be determined.

 

U.K. Concrete Pumping — Camfaud

 

Camfaud’s estimate of income tax expense for the year ended October 31, 2018 of $0.5 million increased by $0.3 million compared to income tax expense of $0.2 million in the comparable period in fiscal 2017, largely due to an increase in taxable income.

 

Concrete Waste Management Services — Eco-Pan

 

Eco-Pan’s estimate of income tax expense for the year ended October 31, 2018 of $0.8 million decreased by $1.9 million compared to income tax expense of $2.8 million in the comparative period in fiscal 2017, largely because of changes due to recent U.S. tax reform.

 

Corporate

 

The Corporate segment’s estimate of income tax expense was minimal for the year ended October 31, 2018. Estimated tax expense increased from an income tax benefit of $2.4 million for the year ended October 31, 2017 to income tax expense of $0.3 million for the year ended October 31, 2018.

 

EBITDA

 

Year Ended October 31,

 

 

2017 to 2018

 

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

Statement of operations information:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Concrete Pumping - Brundage-Bone

 

$

34,966,513

 

 

$

36,925,969

 

 

$

(1,959,456

)

 

 

-5.3

%

U.K. Concrete Pumping - Camfaud

 

 

15,753,598

 

 

 

10,827,292

 

 

 

4,926,306

 

 

 

45.5

%

Concrete Waste Management Services - Eco-Pan

 

 

12,558,725

 

 

 

9,912,446

 

 

 

2,646,279

 

 

 

26.7

%

Corporate

 

 

2,366,179

 

 

 

(3,093,897

)

 

 

5,460,076

 

 

 

-176.5

%

EBITDA

 

$

65,645,015

 

 

$

54,571,810

 

 

$

11,073,205

 

 

 

20.3

%

(1)       Please see “Non-GAAP Measures (Adjusted EBITDA)” below.

 

U.S. Concrete Pumping — Brundage-Bone

 

Brundage-Bone’s EBITDA decreased by 5.3% or $2.0 million for the year ended October 31, 2018 as compared to the comparable 2017 period. The change in EBITDA was due primarily to revenue and margin growth offset by increases to transaction costs as compared to the prior fiscal year that eroded gains from revenue and margin growth. Changes in EBITDA were also due to the other aforementioned factors above.

 

U.K. Concrete Pumping — Camfaud

 

Camfaud’s EBITDA increased by 45.5% or $4.9 million for the year ended October 31, 2018 as compared to the comparable 2017 period primarily due to a full period of earnings for the Camfaud and Reilly acquisitions due to the inclusion of all the acquired component businesses of Camfaud versus only a partial contribution of such acquired businesses of Camfaud in the comparable fiscal 2017 period. Further, the increases in EBITDA were due to increases in market share in the U.K. for the year ended October 31, 2018 as compared to the comparable fiscal 2017 period.

 

Concrete Waste Management — Eco-Pan

 

Eco-Pan EBITDA increased by 26.7% or $2.6 million for the year ended October 31, 2018 as compared to the comparable 2017 period. The increase in EBITDA was primarily related to the revenue increase of $4.9 million combined with relatively stable gross profit margin and slight increases in cost of operations and general and administrative costs. 

 

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Corporate

 

Corporate EBITDA increased by 176.5% or $5.5 million for the year ended October 31, 2018 as compared to the comparable 2017 period. The increase in EBITDA was primarily related to the increase in intercompany rent allocation.

 

Comparison of years ended October 31, 2017 and October 31, 2016

 

Revenue

 

Year Ended October 31,

 

 

2016 to 2017

 

 

 

2017

 

 

2016

 

 

$ Change

 

 

% Change

 

Statement of operations information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Concrete Pumping – Brundage-Bone

 

$

151,194,931

 

 

$

153,488,134

 

 

$

(2,293,203

)

 

 

-1.5

%

U.K. Concrete Pumping – Camfaud

 

 

36,433,763

 

 

 

 

 

 

36,433,763

 

 

 

 

Concrete Waste Management Services – Eco-Pan

 

 

23,581,905

 

 

 

18,937,413

 

 

 

4,644,492

 

 

 

24.5

%

Revenue

 

$

211,210,599

 

 

$

172,425,547

 

 

$

38,785,052

 

 

 

22.5

%

 

U.S. Concrete Pumping — Brundage-Bone

 

Brundage-Bone revenue marginally decreased by 1.5% or $2.3 million to $151.2 million for the fiscal year ended October 31, 2017, compared to $153.5 million in the comparative period in 2016. The decrease was primarily a result of the slower than expected recovery from severe winter weather influencing Brundage-Bone’s Washington, Idaho, Dallas and Wichita branches, in contrast to the unseasonably mild winter experienced in the comparative period in fiscal 2016. The effects of the September 2017 hurricanes in Houston and South Florida had an additional effect of delaying planned construction activity as these markets recovered from the impact of the storms. The overall negative impact on revenue due to these storms during the year ended October 31, 2017 totaled approximately $4.0 million.

 

Revenue in the West region decreased by 1.9% or $0.7 million with Oregon experiencing an increase in revenue of 4.8% or $0.5 million. This increase was offset by decreases in revenue in California and Washington of 4.4% or $0.5 million and 5.5% or $0.7 million, respectively, due to unseasonably colder weather during the year ended October 31, 2017 as compared to the comparable fiscal 2016 period.

 

Revenue in the South region decreased by 6.8% or $2.3 million with Dallas and Houston markets resulting in a revenue decrease of 17.6% or $2.2 million and 8.7% or $0.7 million, respectively. The decreases in revenue for Dallas and Houston were related to harsh winter weather conditions in Dallas and the hurricane impact. These decreases were offset by revenue increases in Austin of 8.9% or $0.5 million due to continued expansion and increased volume of business in this market.

 

Revenue in the Central region decreased by 6.1% or $1.9 million attributable to severe winter weather in Wichita and Colorado with decreases of 18.5% or $1.4 million and 2.8% or $0.5 million, respectively. As previously mentioned, severe weather impacted the results for Wichita, while Colorado had slightly more favorable weather conditions during the 2016 comparable period.

 

Revenue in the Southeast region increased by 5.4% overall or $1.4 million. Strong markets such as Charleston and Knoxville experienced revenue growth of 29.7% or $0.8 million and 55.9% or $1.0 million, respectively. Birmingham was opened during the 2017 fiscal year and contributed an additional $1.6 million in revenue to the Southeast region results. However, these increases in revenue were substantially offset by hurricane impacts in South Florida, which impacted nearby markets such Atlanta, Georgia and Greenville, South Carolina which resulted in revenues decreases of 9.7% or $1.1 million and 41.2% or $1.2 million as compared to the comparable fiscal 2016 period.

 

Revenue in the Mountain region increased by 5.4% or $1.3 million. The Utah market experienced sustained growth of 20.5% or $2.3 million during the year ended October 31, 2017 as compared to the comparable 2016 period. The increase in Utah is attributable to larger volumes overall. These gains were offset by lower results in Arizona and Idaho with decreases of 14.2% or $0.7 million and 4.7% or $0.3 million respectively.

 

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U.K. Concrete Pumping — Camfaud

 

Camfaud revenue totaled approximately $36.4 million in the fiscal year ended October 31, 2017. The revenue split between mobile pumping and static pumping was approximately 70% and 30% during both periods. Given the acquisition of Camfaud by CPH occurred on November 17, 2016, Camfaud’s results were not included in the fiscal year 2016 reporting period.

 

Concrete Waste Management Services — Eco-Pan

 

Revenue increased to $23.6 million for the fiscal year ended October 31, 2017 compared to $18.9 million for the fiscal year 2016, representing an increase of approximately $4.6 million, or 24.5%. The increase was primarily due to increasing demand for Eco-Pan’s services in Eco-Pan’s primary markets of Washington, Oregon, California, Utah, and Colorado. These regions combined generated an increase of $3.3 million or 71.4% of Eco-Pan’s overall growth. There was a partial offset to this demand growth due to harsh weather experienced in early 2017, which limited Eco-Pan pick-ups in certain locations such as California and Washington. After Eco-Pan was purchased by CPH in 2014, Eco-Pan added additional operations in Oklahoma City, Austin, and Atlanta, which continue to experience growth contributing an additional $0.9 million of combined revenue during the year ended October 31, 2017 as compared to the comparable fiscal 2016 period. In May 2017, Eco-Pan opened a new location in Maryland primarily to service the Washington DC and Baltimore markets. The impact to revenue during the year ended October 31, 2017 was minimal given the relative short time the new branch had been operating.

 

Eco-Pan’s largest markets are generally in the Western region of the U.S. Revenue increased in Utah by 64.4% or $1.1 million during the year ended October 31, 2017 as compared to the comparable fiscal 2016 period. Revenue in Washington increased by 8.4% or $0.4 million during the year ended October 31, 2017 as compared to the comparable fiscal 2016 period. Revenue in California increased by 13.6% or $0.6 million during the year ended October 31, 2017 as compared to the comparable fiscal 2016 period. Revenue in Colorado increased by 15.9% or $0.8 million during the year ended October 31, 2017 as compared to the comparable fiscal 2016 period. The remaining increase in revenue was attributable to the various other markets in which Eco-Pan operates. No single market experienced a substantial decrease in revenue of 5% or greater during the year ended October 31, 2017 as compared to the comparable 2016 period.

 

Gross Margin

 

The Company’s gross margin for the year ended October 31, 2017 was 42.5%, down 110 basis points from 43.6% in the year ended October 31, 2016. The decline in our gross margin was predominantly driven by our Brundage-Bone segment, which realized lower operator labor utilization as the result of harsh winter weather.

 

General and Administrative Expenses

 

Year Ended October 31,

 

 

2016 to 2017

 

 

 

2017

 

 

2016

 

 

$ Change

 

 

% Change

 

Statement of operations information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Concrete Pumping – Brundage-Bone

 

$

36,707,978

 

 

$

34,482,752

 

 

$

2,225,226

 

 

 

6.5

%

U.K. Concrete Pumping – Camfaud

 

 

9,799,143

 

 

 

 

 

 

9,799,143

 

 

 

 

Concrete Waste Management Services – Eco-Pan

 

 

7,635,512

 

 

 

7,119,400

 

 

 

516,112

 

 

 

7.2

%

Corporate

 

 

(1,277,723

)

 

 

(1,011,392

)

 

 

(266,331

)

 

 

26.3

%

General and Administrative Expenses

 

$

52,864,910

 

 

$

40,590,760

 

 

$

12,274,150

 

 

 

30.2

%

  

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Table of Contents

 

Transaction Costs

 

Year Ended October 31,

 

 

2016 to 2017

 

 

 

2017

 

 

2016

 

 

$ Change

 

 

% Change

 

Statement of operations information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Concrete Pumping – Brundage-Bone

 

$

4,489,517

 

 

$

3,691,466

 

 

$

798,051

 

 

 

21.6

%

U.K. Concrete Pumping – Camfaud

 

 

 

 

 

 

 

 

 

 

 

 

Concrete Waste Management Services – Eco-Pan

 

 

 

 

 

 

 

 

 

 

 

 

Transaction Costs

 

$

4,489,517

 

 

$

3,691,466

 

 

$

798,051

 

 

 

21.6

%

 

U.S. Concrete Pumping — Brundage-Bone

 

General and administrative expenses, excluding transaction costs, were $36.7 million for the fiscal year ended October 31, 2017, compared to $34.5 million for the fiscal year ended October 31, 2016, representing an increase of $2.2 million. General and administrative expenses included depreciation and amortization expense of $3.3 million and $3.9 million for the fiscal years ended October 31, 2017, and October 31, 2016, respectively. Included in general and administrative expenses were $1.6 million of property rent paid to a related company and $1.7 million of management fees paid to Brundage-Bone’s parent company for the fiscal year ended October 31, 2017. Wages and benefits increased by $0.4 million or 0.4% of revenue to $17.6 million or 11.6% of fiscal year 2017 revenue, primarily due to a $0.5 million one-time severance payment and wage expense growth as Brundage-Bone invested in additional safety and field management personnel. Other items included severance expenses, senior executive relocation costs, recruiting costs and other items. These costs amounted to $2.4 million in the fiscal year ended October 31, 2017.

 

Transaction costs totaled $4.5 million for the Oxford acquisitions during the fiscal year ended October 31, 2017, compared to $3.7 million in fiscal year 2016.

 

U.K. Concrete Pumping — Camfaud

 

General and administrative costs included fixed costs related primarily to wages and benefits for administrative personnel and other fixed costs related to Camfaud’s operations. The lack of activity in fiscal year 2016 was due to the timing of the Camfaud acquisition, which took place in November 2016. Salaries and benefits in the amount of $3.9 million represented approximately 39.6% of total general and administrative costs and represent annual salaries, performance bonuses, pension contributions and payroll taxes paid to management and administrative staff. Costs in the fiscal year ended October 31, 2017 included approximately $0.1 million of other costs in connection with contracted labor for an interim Financial Director and an interim Financial Controller. Depreciation and amortization of $0.4 million represented approximately 3.8% of Camfaud’s total general and administrative costs, and includes intangible asset amortization and depreciation of non-pumping assets, pickup trucks and office equipment.

 

Given the acquisition of Camfaud by CPH occurred on November 17, 2016, Camfaud’s results were not included in the fiscal year 2016 reporting period.

 

Concrete Waste Management Services — Eco-Pan

 

Eco-Pan’s general and administration expenses were $7.6 million for the fiscal year ended October 31, 2017, compared to $7.1 million for the fiscal year 2016, representing an increase of $0.5 million. General and administrative expenses included depreciation and amortization expense of approximately $1.5 million and $2.0 million for the fiscal years ended 2017 and 2016, respectively. This change was due to the full depreciation or disposal of certain assets included in the results of the fiscal year ended October 31, 2016 and as such, the depreciation expense related to these assets did not occur in the fiscal year ended October 31, 2017. Wages and benefits expenses increased by approximately $0.6 million in fiscal year 2017, as Eco-Pan invested in additional personnel to expand the Eco-Pan business and meet the growing demand in Eco-Pan’s markets.

 

Corporate

 

General and administration expenses were ($1.3) million for the fiscal year ended October 31, 2017, compared to ($1.0) million for the fiscal year 2016, representing a decrease of $0.2 million. This amount relates to the elimination of intercompany rent.

 

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Table of Contents

 

Income from operations

 

Year Ended October 31,

 

 

2016 to 2017

 

 

 

2017

 

 

2016

 

 

$ Change

 

 

% Change

 

Statement of operations information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Concrete Pumping – Brundage-Bone

 

$

19,176,349

 

 

$

25,014,619

 

 

$

(5,838,270

)

 

 

-23.3

%

U.K. Concrete Pumping – Camfaud

 

 

4,377,509

 

 

 

 

 

 

4,377,509

 

 

 

 

Concrete Waste Management Services – Eco-Pan

 

 

7,573,092

 

 

 

4,875,537

 

 

 

2,697,554

 

 

 

55.3

%

Corporate

 

 

1,277,723

 

 

 

1,011,392

 

 

 

266,331

 

 

 

26.3

%

Income from operations

 

$

32,404,673

 

 

$

30,901,548

 

 

$

1,503,125

 

 

 

4.9

%

 

U.S. Concrete Pumping — Brundage-Bone

 

As a result of the factors discussed above, income generated from operations was $19.2 million for the fiscal year ended October 31, 2017 compared to $25.0 million for the fiscal year ended October 31, 2016, representing a decrease of $5.8 million, or approximately 23.3%. Brundage-Bone’s operating margin was 12.7% in fiscal year 2017 compared to 16.3% in fiscal year 2016. The decrease in income from operations was due primarily to the negative impacts of severe weather events in fiscal 2017 and higher transaction costs related to the Camfaud acquisitions relative to the comparative fiscal 2016 period.

 

U.K. Concrete Pumping — Camfaud

 

As a result of the factors discussed above, income generated from operations was $4.4 million for the fiscal year ended October 31, 2017, resulting in an operating margin of 12.0%.

 

Given the acquisition of Camfaud by CPH occurred on November 17, 2016, Camfaud’s results were not included in the fiscal year 2016 reporting period.

 

Concrete Waste Management Services — Eco-Pan

 

As a result of the factors discussed above, income generated from operations was $7.6 million for the fiscal year ended October 31, 2017, compared to $4.9 million for the comparative fiscal year ended October 31, 2016, representing an increase of $2.7 million, or 55.3%. Eco-Pan’s operating margin was 32.1% in fiscal year 2017 compared to 25.8% in fiscal year 2016. The increase in income from continuing operations was primarily a result of maintaining the same level of general administrative expense while substantially increasing sales volume and maintaining a stable gross profit margin.

 

Corporate

 

Income from operations increased by approximately 26.3% to $1.3 million for year ended 2017, compared to $1.0 million in the comparative period in fiscal 2016.

 

Other (Expense)/Income

 

Year Ended October 31,

 

 

2016 to 2017

 

 

 

2017

 

 

2016

 

 

$ Change

 

 

% Change

 

Statement of operations information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Concrete Pumping – Brundage-Bone

 

$

(24,238,203

)

 

$

(20,223,437

)

 

$

(4,014,766

)

 

 

19.9

%

U.K. Concrete Pumping – Camfaud

 

 

(3,521,397

)

 

 

 

 

 

(3,521,397

)

 

 

 

Concrete Waste Management Services – Eco-Pan

 

 

24,864

 

 

 

9,021

 

 

 

15,843

 

 

 

175.6

%

Other (Expense)/Income

 

$

(27,734,736

)

 

$

(20,214,416

)

 

$

(7,520,320

)

 

 

37.2

%

 

U.S. Concrete Pumping — Brundage-Bone

 

Other (Expense)/Income is comprised of interest expense, loss on debt extinguishment, and miscellaneous other income. Interest expense was $19.1 million for the fiscal year ended October 31, 2017 compared to $19.5 million in fiscal year 2016, reflecting a minimal decrease of $0.4 million.

 

Brundage-Bone’s net loss on the extinguishment of debt totaled approximately $5.2 million, which represented the difference between gains or losses in the carrying amount of notes repurchased, accrued interest, and the write-off of deferred loan fees on $7.6 million of Senior Notes that were repurchased in fiscal year 2016 as well as the loss amount associated with the unamortized portion of debt issuance costs noted, the unamortized discount expense, and the prepayment penalty associated with the extinguishment of the unsecured note in 2017.

 

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Table of Contents

 

U.K. Concrete Pumping — Camfaud

 

Other (Expense)/Income is comprised of interest expense, loss on debt extinguishment, and miscellaneous other income. Interest expense was $3.6 million for the fiscal year ended October 31, 2017. Given the acquisition of Camfaud by CPH occurred on November 17, 2016, Camfaud’s results were not included in the fiscal year 2016 reporting period. Gain/ (Loss) on extinguishment of debt was zero.

 

Concrete Waste Management Services — Eco-Pan

 

Other (Expense)/Income is comprised of interest expense, loss on debt extinguishment, and miscellaneous other income. Interest expense was minimal for the fiscal year ended October 31, 2017 and zero for the comparative period in fiscal year 2016. Gain/ (Loss) on extinguishment of debt was zero for both reporting periods.

 

Income Tax (Benefit) Provision

 

Year Ended October 31,

 

 

2016 to 2017

 

 

 

2017

 

 

2016

 

 

$ Change

 

 

% Change

 

Statement of operations information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Concrete Pumping – Brundage-Bone

 

$

3,109,635

 

 

$

4,603,472

 

 

$

(1,493,837

)

 

 

-32.5

%

U.K. Concrete Pumping – Camfaud

 

 

245,424

 

 

 

 

 

 

245,424

 

 

 

 

 

Concrete Waste Management Services – Eco-Pan

 

 

2,791,138

 

 

 

703,733

 

 

 

2,087,405

 

 

 

296.6

%

Corporate

 

 

(2,389,539

)

 

 

(853,664

)

 

 

(1,535,875

)

 

 

179.9

%

Income Tax (Benefit) Provision

 

$

3,756,658

 

 

$

4,453,541

 

 

$

(696,883

)

 

 

-15.6

%

 

U.S. Concrete Pumping — Brundage-Bone

 

Estimated income tax expense for fiscal year 2017 was $3.1 million compared to $4.6 million in fiscal year 2016 due to a decrease in taxable income.

 

U.K. Concrete Pumping — Camfaud

 

Estimated income tax expense for fiscal year 2017 was $0.2 million. Given the acquisition of Camfaud by CPH occurred on November 17, 2016, Camfaud’s results were not included in the fiscal year 2016 reporting period.

 

Concrete Waste Management Services — Eco-Pan

 

Estimated income tax expense for fiscal year 2017 was $2.8 million compared to $0.7 million in fiscal year 2016 due to an increase in taxable income.

 

Corporate

 

Estimated income tax benefit for fiscal year 2017 was $2.4 million compared to $0.9 million in fiscal year 2016.

 

EBITDA(1)

 

Year Ended October 31,

 

 

2016 to 2017

 

 

 

2017

 

 

2016

 

 

$ Change

 

 

% Change

 

Statement of operations information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Concrete Pumping – Brundage-Bone

 

$

36,925,969

 

 

$

43,763,760

 

 

$

(6,837,791

)

 

 

-15.6

%

U.K. Concrete Pumping – Camfaud

 

 

10,827,292

 

 

 

 

 

 

10,827,292

 

 

 

 

 

Concrete Waste Management Services – Eco-Pan

 

 

9,912,446

 

 

 

7,560,512

 

 

 

2,351,934

 

 

 

31.1

%

Corporate

 

 

(3,093,897

)

 

 

1,188,480

 

 

 

(4,282,377

)

 

 

-360.3

%

EBITDA

 

$

54,571,810

 

 

$

52,512,752

 

 

$

2,059,058

 

 

 

3.9

%

(1)       Please see “Non-GAAP Measures (Adjusted EBITDA)” below.

 

U.S. Concrete Pumping — Brundage-Bone

 

Brundage-Bone’s EBITDA decreased by $6.8 million or 15.6% during the year ended October 31, 2017 as compared to the comparable 2016 period. The decrease in EBITDA was attributed to a combination of lower revenues of $2.3 million and gross profit of $2.8 million and higher transaction costs of $0.8 million (See discussion on transaction costs below). As noted above, the primary cause of the decrease in revenue was due to severe weather events in the South and Southeast regions.

 

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U.K. Concrete Pumping — Camfaud

 

 Camfaud’s EBITDA totaled $10.8 million during the fiscal year ended October 31, 2017. There was no comparable information during the year ended October 31, 2016 as the CPH did not complete the acquisition of Camfaud until November 17, 2016.

 

 Concrete Waste Management Services — Eco-Pan

 

Eco-Pan EBITDA increased by 31.1% or $2.4 million during the fiscal year ended October 31, 2017 as compared to the comparable 2016 period. The increase in operating income was primarily related to the revenue increase of $4.6 million and gross profit increase of $3.2 million respectively. These increases were offset by an increase in general and administrative costs of $0.5 million.

 

Corporate

 

Corporate EBITDA decreased by (360.3%) or ($4.3) million during the during the fiscal year ended October 31, 2017 as compared to the comparable 2016 period. The decrease in EBITDA was due to the write-off of debt extinguishment costs which was offset by intercompany rent allocation. Intercompany rent is eliminated in consolidation.

 

Cash Flows

 

The following table summarizes our cash flow data for the fiscal years of 2018, 2017 and 2016.

 

 

 

Years Ended October 31,

 

 

 

2018

 

 

2017

 

 

2016

 

Statement of operations information:

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

39,616,657

 

 

$

34,226,394

 

 

$

35,757,440

 

Net cash used in investing activities

 

 

(49,499,436

)

 

 

(83,088,761

)

 

 

(28,973,671

)

Net cash provided by (used in) financing activities

 

 

13,012,841

 

 

 

52,763,957

 

 

 

(14,812,802

)

 

Operating Activities

 

Cash generated from operating activities is influenced by our ability to convert what our management believes is a relatively high proportion of revenue into cash, as well as by our investment in company resources and equipment to support the continued growth of the business. Cash generated from operating activities typically reflects net income, as adjusted for non-cash expense items such as depreciation, amortization and stock-based compensation, and changes in our operating assets and liabilities as we continue to expand our business. Generally, our management believes that our business requires a relatively low level of working capital investment due to the low inventory requirement and customers’ tendency to pay us on a timely basis for its services as we submit daily invoices for many of its services.

 

Our net cash from operating activities totaled $39.6 million for the year ended October 31, 2018, of which our net income of $28.4 million was a source of funds. Depreciation and amortization totaled $27.3 million in the period, with amortization of intangibles comprising $7.9 million and amortization of deferred financing costs comprising $1.7 million. Deferred income taxes totaled $11.1 million, gain on sale of equipment totaled $2.6 million for the period and change in fair value of contingent consideration of $0.5 million. Uses of funds in the period included changes in trade receivables of $7.5 million, changes in inventory of $0.7 million, changes in prepaid and other assets of $1.4 million, changes in accounts payable of $1.8 million, and changes in tax accounts of $0.4 million. Sources of funds included changes in accrued expenses of $8.7 million.

 

Net cash from operating activities totaled $34.2 million for the fiscal year ended October 31, 2017, of which our net income of $0.9 million represented a source of funds. Depreciation and amortization totaled $29.0 million during the year with amortization of intangibles comprising $7.8 million and amortization of deferred financing fees comprising $1.9 million. Deferred income taxes of $0.2 million, represented a source of funds while gain on sale of equipment of $0.6 million represented a use of funds in the period. Write-off of deferred financing and debt discount costs represented a $3.4 million source of funds in the period. Changes in accrued expenses and accounts payable of $0.6 million, and changes in trade receivables of $0.2 million represented sources of funds. Changes in prepaid and other assets and inventory totaling $0.7 million and changes in income tax accounts of $1.3 million represented uses of funds in the period.

 

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Net cash from operating activities totaled $35.8 million for the twelve months ended October 31, 2016, of which our net income of $6.2 million represented a source of funds. Depreciation and amortization totaled $24.1 million during the period, with amortization of intangible assets comprising $5.7 million and amortization of deferred financing costs comprising $1.8 million. Deferred taxes represented a $3.8 million source of funds, while gain on repayment of debt of $0.3 million and gain on the sale of property of $0.4 million represented uses of funds in the period. Write-off of deferred financing costs provided a $0.9 million source of funds in the period. Changes in accrued expenses and accounts payable of $4.2 million represented a source of funds in the period, while changes in trade receivables of $0.7 million, changes in inventory, prepaids and other assets of $1.5 million and changes in income tax accounts of $1.0 million represented uses of funds in the period.

 

Investing Activities

 

Our business requires regular capital expenditures to maintain a large, safely maintained and modern equipment fleet. We also regularly take advantage of opportunities to acquire other concrete pumping and related businesses, which can expand our reach into new or overlapping geographic markets, add modern equipment assets to our fleet or allow us to further expand its service offering to our customers.

 

We invest to maintain a modern fleet of equipment while selling older and under-utilized pieces of equipment. We began making investments in new equipment to replace aging assets starting in 2014, and we expect to continue this practice given the strong performance of the business and improved construction end market fundamentals. We estimate that our fleet assets generally have a useful life of up to 20 years depending on the size of the equipment, hours in service, yardage pumped, and, in certain instances, other circumstances unique to an asset. We manage our fleet of equipment according to the wear and tear that a specific type of equipment is expected to experience over its useful life. As of October 31, 2018, the average age of our equipment in the U.S. and the U.K. was approximately 10 years and 8 years, respectively, and it is our strategy to maintain an average fleet age of approximately 10 years. We may allocate additional capital for fleet expansion if we believe growth opportunities in particular markets cannot be met by our existing fleet (including geographic transfers), or if our analysis indicates that we could improve returns on capital with additional changes in fleet mix. The recent changes in U.S. tax reform present additional opportunities for us to strengthen our fleet of equipment.

 

Net cash used in investing activities totaled $49.5 million for the year ended October 31, 2018. The asset purchase acquisition of O’Brien’s net assets represented a $21.0 million use of funds in the period, as we further expanded our business in markets including Denver, Colorado and Arizona. Our investment in our fleet of equipment totaled approximately $31.7 million and proceeds from the sale of equipment totaled approximately $3.2 million in the period.

 

Net cash used in investing activities totaled $83.1 million for the fiscal year ended October 31, 2017. The acquisition of net assets represented a $60.4 million use of funds, primarily related to the Oxford acquisitions completed in November 2016 and July 2017 which expanded our operations internationally into the U.K. Our investment in our fleet of equipment totaled approximately $23.7 million and proceeds from sale of equipment totaled approximately $1.0 million in the period.

 

Net cash used in investing activities totaled $29.0 million for the fiscal year ended October 31, 2016. The acquisition of net assets represented a $6.7 million use of funds in the period. Our investment in our fleet of equipment totaled approximately $22.6 million in the period. Of this amount, $8.2 million was paid for fleet assets that were delivered in the fourth quarter of fiscal year 2015. Additionally, proceeds from the sale of equipment represented a $0.2 million source of funds in the period.

 

Financing Activities

 

Net cash provided by financing activities totaled $13.0 million for the year ended October 31, 2018, which included a $15.6 million source of funds raised through a bond offering to finance the O’Brien asset purchase. We also made net payments of $2.4 million on our working capital line of credit and $0.2 million on our capital lease obligations.

 

Net cash from financing activities totaled $52.8 million for the fiscal year ended October 31, 2017. This included funds generated from the issuance of $40.4 million of additional senior secured notes and $61.4 million in proceeds from our working capital line of credit. We made payments on our senior secured notes totaling $39.1 million, and paid $1.5 million in deferred financing costs and a $1.4 million prepayment penalty in the period. Additionally, we repurchased $1.4 million in preferred stock, paid $4.8 million in preferred stock dividends, and repurchased $0.7 million of stock options in the period.

 

Net cash used in financing activities totaled $14.8 million for the fiscal year ended October 31, 2016. We made principal payments on our senior secured notes totaling $18.4 million and received $3.6 million in proceeds on its working capital line of credit in the period.

 

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Consolidated Results of Operations for the three months ended January 31, 2019 and 2018

 

To reflect the application of different bases of accounting as a result of the Business Combination, the tables provided below separate the Company’s results via a black line into two distinct periods as follows: (1) up to and including the Business Combination closing date (labeled “Predecessor”) and (2) the period after that date (labeled “Successor”). The period presented from December 6, 2018 through January 31, 2019 is the “Successor” period. The periods presented from November 1, 2018 through December 5, 2018 and November 1, 2017 through January 31, 2018 are the “Predecessor” periods.

 

The historical financial information of Industrea (a special purpose acquisition company, or SPAC) prior to the Business Combination has not been reflected in the Predecessor financial statements as these historical amounts have been determined to be not useful information to a user of the financial statements. SPACs deposit the proceeds from their initial public offerings into a segregated trust account until a business combination occurs, where such funds are then used to either pay consideration for the acquiree or stockholders who elect to redeem their shares of common stock in connection with the business combination. SPACs will operate until the closing of a business combination, and the SPAC’s operations until the closing of a business combination, other than income from the trust account investments and transaction expenses, are nominal. Accordingly, no other activity in the Company was reported for periods prior to December 6, 2018 besides CPH’s operations as Predecessor. 

 

The discussion below combines the results of operations for the Predecessor period from November 1, 2018 through December 5, 2018, and the Successor period from December 6, 2018 through January 31, 2019, and is discussed as the fiscal quarter ended January 31, 2019 when comparing to the fiscal quarter ended January 31, 2018. As noted above, the Predecessor and Successor periods reflect the application of a different basis of accounting as a result of the Business Combination, and as such, the results for the fiscal quarter ended January 31, 2019 are non-GAAP. Management believes combining the Predecessor and Successor periods for the three months ended January 31, 2019 when reviewing the operating results is more useful in discussing the overall operating performance when compared to the same period in the prior year. Accordingly, the discussion below only includes the non-GAAP results for the three-months ended January 31, 2019.

 

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Successor

   

Predecessor

   

S/P Combined
(non-GAAP)

   

Predecessor

 

(dollars in thousands)

 

December 6, 2018
through
January 31,
2019

   

November 1, 2018
through
December 5,
2018

   

Three months ended January 31, 2019

   

Three months ended January 31, 2018