Arcosa(US:ACA)2023-08-03 16:00Revenue Performance - Revenues for Q2 2023 decreased by 3.0% to $584.8 million compared to Q2 2022, while revenues for the first half of 2023 decreased by 0.4% to $1,134.0 million[75]. - Revenues in Construction Products increased by 7.7% for the three months and 9.5% for the six months ended June 30, 2023, driven by higher pricing and increased volumes[92][93]. - Revenues decreased 22.9% for the three months ended June 30, 2023, primarily due to the divestiture of the storage tanks business, with utility, wind, and related structures revenue remaining flat[96]. - For the six months ended June 30, 2023, revenues decreased 20.1%, mainly attributed to the decline in revenue from the divested storage tanks business, while utility, wind, and related structures revenue increased by 4.4%[97]. Operating Profit - Operating profit for Q2 2023 decreased by $6.2 million to $51.0 million, while for the first half of 2023, it increased by $34.2 million to $126.1 million, supported by asset sale gains[75]. - Operating profit decreased by 10.8% for the three months ended June 30, 2023, but increased by 37.2% for the six months ended June 30, 2023[85]. - Operating profit in Construction Products increased by 22.4% for the three months and 87.3% for the six months ended June 30, 2023, aided by a reduction in a holdback obligation and a land sale gain[91][94]. - Operating profit in Engineered Structures decreased by 47.7% for the three months and 26.1% for the six months ended June 30, 2023, primarily due to lower margins and a decline in volumes[95]. - Operating profit in Transportation Products increased by 231.4% for the three months and 250.0% for the six months ended June 30, 2023, driven by higher volumes and improved margins[95]. Backlog and Future Growth - The backlog for Engineered Structures as of June 30, 2023, was $1.5 billion, significantly up from $671.3 million at the end of 2022, indicating strong production visibility[78]. - The backlog for Transportation Products reached $287.1 million, the highest level since Q1 2020, with 45% expected to be delivered in 2023[78]. - Approximately 27% of the unsatisfied performance obligations for utility and wind structures are expected to be delivered in 2023, with the remainder extending through 2028[78]. - The company anticipates a strong multi-year rebound in volumes starting in 2024 as new wind projects ramp up[74]. - As of June 30, 2023, the backlog for utility, wind, and related structures was $1,507.4 million, significantly up from $671.3 million at the end of 2022[99]. Expenses and Cost Management - Selling, general, and administrative expenses as a percentage of revenues were 12.1% for Q2 2023, up from 11.0% in Q2 2022, reflecting a 6.6% increase in expenses[83]. - Selling, general, and administrative expenses increased by 17.1% for the three months and 9.0% for the six months ended June 30, 2023, primarily due to costs from recently acquired businesses[92][93]. - Corporate overhead costs increased 5.0% for the three months ended June 30, 2023, primarily due to higher compensation-related expenses[104]. - Selling, general, and administrative expenses decreased 12.8% for the three months ended June 30, 2023, largely due to the elimination of costs from the storage tanks business[96]. Tax and Financial Position - The effective tax rate for Q2 2023 was 12.0%, down from 20.6% in Q2 2022, indicating a favorable tax environment[75]. - The effective tax rate for the three and six months ended June 30, 2023, was 12.0% and 17.0%, respectively, down from 20.6% and 21.8% in the same periods of 2022[89]. - The company is subject to potential tax liabilities related to the separation from Trinity Industries, Inc. in November 2018[117]. Capital and Cash Flow - Net cash provided by operating activities for the six months ended June 30, 2023, was $154.9 million, an increase from $111.2 million in the same period of 2022[106]. - Capital expenditures for the six months ended June 30, 2023, were $96.9 million, up from $52.9 million in the prior year, driven by investments in new facilities[108]. - The company had no outstanding loans under the revolving credit facility as of June 30, 2023, with $474.9 million available for borrowing[109]. Shareholder Returns - The Company declared a quarterly cash dividend of $0.05 per share, paid on July 31, 2023[110]. - A new $50 million share repurchase program was authorized, effective January 1, 2023, with no repurchases made as of June 30, 2023[111]. - The Company has not repurchased any shares under the $50 million authorization as of June 30, 2023, leaving the full amount available[111]. Risks and Challenges - The Company faces various risks including market conditions, competition, and supply chain disruptions that could impact future performance[115]. - The Company has not experienced any material change in market risks since December 31, 2022[119]. - The Company is focused on mitigating cybersecurity risks and protecting intellectual property rights[115]. - The Company anticipates potential benefits from the IRA, including AMP tax credits for wind towers, pending further guidance[117]. Other Financial Instruments - An interest rate swap instrument was transitioned from LIBOR to SOFR on July 1, 2023, fixing the SOFR component of borrowings at a monthly rate of 2.71%[112]. - As of June 30, 2023, the Company recorded an asset of $1.1 million for the fair value of the interest rate swap instrument[112].