Arcosa, Inc.: Form 10-Q for the period ended Jun 30, 2024

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. Our MD&A is presented in the following sections:

• Company Overview
• Market Outlook
• Executive Overview
• Results of Operations
• Liquidity and Capital Resources
• Recent Accounting Pronouncements
• Forward-Looking Statements

Our MD&A should be read in conjunction with the Consolidated Financial Statements of Arcosa, Inc. and its consolidated subsidiaries (“Arcosa,” “Company,” “we,” or “our”) and related Notes in Part I, Item 1 of this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and related Notes in Item 8, “Financial Statements and Supplementary Data”, of our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Annual Report on Form 10-K”).

Company Overview

Arcosa, headquartered in Dallas, Texas, is a provider of infrastructure-related products and solutions with leading positions in construction, engineered structures, and transportation markets in North America. Arcosa is a Delaware corporation and was incorporated in 2018 as an independent, publicly-traded company, listed on the New York Stock Exchange.

Market Outlook

• Within our Construction Products segment, market demand remains healthy overall when seasonal weather conditions have been normal, supported by increased infrastructure spending and private non-residential activity. The outlook for single-family residential housing continues to be impacted by higher interest rates and home affordability, which has negatively impacted volumes. We have been successful in managing inflationary cost pressures through proactive price increases.
• Within our Engineered Structures segment, our backlog as of June 30, 2024 provides good production visibility for the remainder of 2024. Our customers remain committed to taking delivery of these orders. In utility structures, order and inquiry activity continues to be healthy, as customers remain focused on grid hardening and reliability initiatives. The passage of the Inflation Reduction Act ("IRA") on August 16, 2022, which included a long-term extension of the Production Tax Credit (“PTC”) for new wind farm projects and introduced new Advanced Manufacturing Production (“AMP”) tax credits for companies that domestically manufacture and sell clean energy equipment in the U.S., is a significant catalyst for our wind towers business. As demonstrated by more than $1.1 billion of new orders for delivery through 2028, which we have received since the passage of the IRA, our wind towers business is at the beginning stages of a market recovery. A large portion of these orders will support wind energy expansion projects in the Southwest. As a result, we have opened a new plant in New Mexico and have started delivering towers from this facility late in the second quarter of 2024.
• Within our Transportation Products segment, our backlog for inland barges as of June 30, 2024 was $251.5 million and extends into 2025. Our customers remain committed to taking delivery of these orders. Our barge business is recovering from cyclical lows resulting from the onset of the COVID-19 pandemic when order levels fell sharply and have remained low due to persistently high steel prices. Over this time, customer inquiries have remained healthy, initially for dry barges and more recently for tank barges. The fleet continues to age as new builds have not kept pace with scrapping, and utilization rates are high. We have been successful in filling orders when we can strategically source steel. During the second quarter, we received orders of $33 million primarily for tank barges. Demand for steel components has stabilized as the near-term outlook for the new railcar market indicates replacement-level demand.

Executive Overview

Recent Developments

In August 2024, the Company entered into an agreement to acquire the construction materials business of Stavola Holding Corporation and its affiliated entities ("Stavola") for $1.2 billion in cash. Stavola, which will be reported within the Construction Products segment, serves the New York-New Jersey market through its network of five natural aggregates quarries, twelve asphalt plants, and three recycled aggregates sites. The Company has obtained $1.2 billion of committed secured bridge loan financing, as well as a backstop to its existing $600 million revolving credit facility. Prior to the transaction close, the Company anticipates accessing the long-term debt capital markets for permanent financing with a mix of secured and unsecured debt. The transaction is expected to close in the fourth quarter.

Concurrently, the Company announced it has entered into an agreement to sell its steel components business. The steel components business, reported in the Transportation Products segment, is a leading supplier of railcar coupling devices, railcar axles, and circular forgings. The transaction is expected to close during the third quarter.

In April 2024, we completed the acquisition of Ameron Pole Products, LLC ("Ameron"), a leading manufacturer of highly engineered, premium concrete and steel poles for a broad range of infrastructure applications, including lighting, traffic, electric distribution, and small-cell telecom, for a total purchase price of $180.0 million. With operations in Alabama, California, and Oklahoma, Ameron is included in our Engineered Structures segment. The acquisition was funded with $160.0 million of borrowings under our revolving credit facility and cash on hand.

Financial Operations and Highlights

• Revenues for the three and six months ended June 30, 2024 increased by 13.7% and 11.4% to $664.7 million and $1,263.3 million, respectively, from the same periods in 2023, due to higher revenues in all three segments.
• Operating profit for the three months ended June 30, 2024 increased by $16.2 million to $67.2 million driven by growth in all three segments. Excluding the $21.8 million gain on the sale of depleted land in the prior period, operating profit for the six months ended June 30, 2024 increased by $16.3 million to $120.6 million with all three segments contributing to the growth.
• Selling, general, and administrative expenses increased by 12.4% and 11.6% for the three and six months ended June 30, 2024, respectively, compared to the same periods in the prior year, driven by increased costs from recently acquired businesses and higher acquisition and divestiture-related expenses. As a percentage of revenues, selling, general, and administrative expenses were 12.0% and 11.8% for the three and six months ended June 30, 2024, respectively, compared to 12.1% and 11.7% for the same periods in 2023, respectively.
• The effective tax rate for the three and six months ended June 30, 2024 was 14.3% and 15.6%, respectively, compared to 12.0% and 17.0%, respectively, for the same periods in 2023. See Note 10 Income Taxes to the Consolidated Financial Statements.
• Net income for the three and six months ended June 30, 2024 was $45.6 million and $84.8 million, respectively, compared to $40.9 million and $96.6 million, respectively, for the same periods in 2023.

Our Engineered Structures and Transportation Products segments operate in cyclical industries. Additionally, results in our Construction Products segment are affected by weather and seasonal fluctuations with the second and third quarters historically being the quarters with the highest revenues.

Unsatisfied Performance Obligations (Backlog)

As of June 30, 2024, December 31, 2023, and June 30, 2023, our unsatisfied performance obligations, or backlog, were as follows:

(in millions)

Approximately 37% of the unsatisfied performance obligations for utility, wind, and related structures in our Engineered Structures segment are expected to be delivered during 2024, approximately 32% are expected to be delivered during 2025 and the remainder are expected to be delivered through 2028. Approximately 69% of the unsatisfied performance obligations for inland barges in our Transportation Products segment are expected to be delivered during 2024, and the remainder are expected to be delivered during 2025.

Results of Operations

Overall Summary

Revenues

(in millions)

(in millions)

2024 versus 2023

• Revenues increased by 13.7% and 11.4% during the three and six months ended June 30, 2024, respectively.
• Revenues from Construction Products increased primarily due to the contribution from recent acquisitions.
• Revenues from Engineered Structures increased primarily due to higher volumes in our utility structures and wind towers businesses and the contribution from the acquired Ameron business.
• Revenues from Transportation Products increased due to higher hopper barge deliveries.

Operating Costs

(in millions)

(in millions)

(1) Depreciation, depletion, and amortization are components of operating costs.

2024 versus 2023

• Operating costs increased by 11.9% and 13.4% during the three and six months ended June 30, 2024, respectively.
• Operating costs for Construction Products increased primarily due to increased costs from the recently acquired businesses.
• Operating costs for Engineered Structures increased primarily due to higher volumes in utility structures and wind towers and increased costs from the acquired Ameron business.
• Operating costs for Transportation Products were roughly flat primarily due to higher volumes in inland barge.
• Depreciation, depletion, and amortization expense increased as a result of recent acquisitions and organic growth investments.
• Selling, general, and administrative expenses increased by 12.4% and 11.6% for the three and six months ended June 30, 2024, compared to the same periods in the prior year, driven by increased costs from recently acquired businesses and higher acquisition and divestiture-related expenses. As a percentage of revenues, selling, general, and administrative expenses were 12.0% and 11.8% for the three and six months ended June 30, 2024, respectively, compared to 12.1% and 11.7% for the same periods in 2023, respectively.

Operating Profit (Loss)

(in millions)

(in millions)

2024 versus 2023

• Operating profit increased 31.8% for the three months ended June 30, 2024 and increased 15.6% for the six months ended June 30, 2024, excluding the $21.8 million gain on the sale of depleted land in the prior period.
• Operating profit in Construction Products increased primarily due to the accretive impact of recent acquisitions and operating improvements in our specialty materials business. For the six months ended June 30, 2024, operating profit increased 9.8% excluding the prior year land sale gain.
• Operating profit in Engineered Structures increased for the three and six months ended June 30, 2024 due to additional gains on sale of the storage tanks business, higher utility structure and wind tower volumes, and the impact of the acquired Ameron business.
• Operating profit in Transportation Products increased for the three and six months ended June 30, 2024 driven by higher hopper barge volumes and lower selling, general, and administrative expenses.

For further discussion of revenues, costs, and the operating results of individual segments, see Segment Discussion below.

Other Income and Expense

Other, net (income) expense consists of the following items:

(in millions)

Income Taxes

The provision for income taxes results in effective tax rates that differ from the statutory rates. The Company's effective tax rate for the three and six months ended June 30, 2024 was 14.3% and 15.6%, respectively, compared to 12.0% and 17.0%, respectively, for the same periods in 2023. The change in the tax rate for the three and six months ended June 30, 2024 is primarily due to AMP tax credits, differences in the tax effects of foreign currency translations, compensation-related items, state income taxes and statutory depletion deductions.

Our effective tax rate differs from the federal tax rate of 21.0% due to AMP tax credits, tax effects of foreign currency translations, compensation-related items, state income taxes and statutory depletion deductions. See Note 10 Income Taxes to the Consolidated Financial Statements for further discussion of income taxes.

Segment Discussion

Construction Products

($ in millions)

($ in millions)

(1) Depreciation, depletion, and amortization are components of operating profit.

Three Months Ended June 30, 2024 versus Three Months Ended June 30, 2023

• Revenues increased 4.3% primarily due to recent acquisitions. Organic revenues in our aggregates and specialty materials businesses were roughly flat as higher pricing was mostly offset by lower volumes primarily due to elevated rainfall during the period, a decrease in freight revenue, and a reduction in revenue from recently divested operations. Revenues in our trench shoring business increased 7.7% primarily due to higher volumes.
• Cost of revenues increased 3.4% primarily due to increased costs from the recently acquired businesses, including higher depreciation, depletion, and amortization expense and the cost impact of the fair market value write-up of acquired inventory and a $5.0 million benefit recognized in the prior period related to the reduction in a holdback obligation owed on a previous acquisition. The increase was partially offset by lower organic volumes in our aggregates and specialty materials businesses and operating improvements in our specialty materials and trench shoring businesses. As a percentage of revenues, cost of revenues decreased to 75.4% in the current period, compared to 76.1% in the prior period.
• Selling, general, and administrative expenses decreased 1.4% due to lower costs in our aggregates and trench shoring businesses. Selling, general, and administrative expenses as a percentage of revenues was 10.5% in the current period, compared to 11.1% in the prior period.
• During the current period, the segment recognized a $5.0 million gain on the sale of an under-performing single-location asphalt and paving operation and an impairment charge of $5.8 million related to the closure of its aggregates operations in west Texas for a net reduction in operating profit of $0.8 million.
• Operating profit increased 14.5% primarily due to the accretive impact of recent acquisitions and operating improvements in our specialty materials business and trench shoring businesses, partially offset by the benefit from the holdback payment in the prior period.
• Depreciation, depletion, and amortization expense increased 5.8% primarily due to the fair market value write-up of long-lived assets from recent acquisitions and organic growth investments.

Six Months Ended June 30, 2024 versus Six Months Ended June 30, 2023

• Revenues increased 5.3% primarily due to recent acquisitions. Organic revenue in our aggregates and specialty materials businesses were up slightly as higher pricing more than offset the lower volumes driven by abnormally wet weather, a decrease in freight revenue, and a reduction in revenue from recently divested operations. Revenues from our trench shoring business increased 11.6% driven by revenues from higher organic volumes and the acquisition completed in the first quarter of 2023.
• Cost of revenues increased 5.8% primarily due to increased costs from the recently acquired businesses, including higher depreciation, depletion, and amortization expense and $1.3 million for the cost impact of the fair market value write-up of acquired inventory and a $5.0 million benefit recognized in the prior period related to the reduction in a holdback obligation owed on a previous acquisition. These costs were partially offset by lower organic volumes in our aggregates and specialty materials businesses and operating improvements in our specialty materials business. As a percentage of revenues, cost of revenues was 77.1% in the current period, compared to 76.7% in the prior period.
• Selling, general, and administrative expenses were roughly flat. Selling, general, and administrative expenses decreased as a percentage of revenues to 10.8%, compared to 11.1% in the prior period.
• Operating profit decreased 18.7% primarily due to a $21.8 million gain on the sale of depleted land in the prior period. Excluding the gain, operating profit increased 9.8% driven by the accretive impact of recent acquisitions and operating improvements in our specialty materials business.
• Depreciation, depletion, and amortization expense increased primarily due to recent acquisitions and organic growth investments.

Engineered Structures

($ in millions)

($ in millions)

(1) Depreciation and amortization are components of operating profit.

Three Months Ended June 30, 2024 versus Three Months Ended June 30, 2023

• Revenues increased 32.8% primarily due to higher volumes in our utility structures and wind towers businesses and the contribution from the acquired Ameron business.
• Cost of revenues increased 33.0% primarily due to increased costs from the acquired Ameron business, including higher depreciation and amortization expense and $1.6 million for the cost impact of the fair market value write-up of acquired inventory. Costs of revenues also increased due to higher utility structures and wind towers volumes and additional expenses incurred related to the startup of two new facilities: a concrete utility structures plant and a wind tower plant. These costs were partially offset by higher AMP tax credits.
• Selling, general, and administrative expenses increased 40.0% primarily due to additional costs from the acquired Ameron business and higher compensation-related costs in utility structures.
• During the current period, the Company recognized a gain on the sale of a non-operating facility that previously supported the divested storage tanks business.
• Operating profit increased 61.8% primarily due to the gain recognized during the period, higher utility structure and wind tower volumes, and the impact of the acquired Ameron business.
• Depreciation and amortization expense increased primarily due to the acquired Ameron business and organic growth investments.

Six Months Ended June 30, 2024 versus Six Months Ended June 30, 2023

• Revenues increased 22.1% primarily due to higher volumes in our utility structures and wind towers businesses and the contribution from the acquired Ameron business, partially offset by lower utility structures pricing due to product mix.
• Cost of revenues increased 24.1% primarily due to increased costs from the acquired Ameron business, including higher depreciation and amortization expense and $1.6 million for the cost impact of the fair market value write-up of acquired inventory. Costs of revenues also increased due to higher utility structures and wind towers volumes and additional expenses incurred related to the startup of two new facilities: a concrete utility structures plant and a wind tower plant, which was partially offset by higher AMP tax credits.
• Selling, general, and administrative expenses increased 29.0% primarily due to additional cost from the acquired Ameron business and higher compensation-related costs in utility structures.
• During both periods presented, the Company recognized an additional gain on the sale of the storage tanks business, which was divested on October 3, 2022, related to the settlement of certain contingencies from the sale and gain on the sale of a non-operating facility that previously supported the divested business.
• Operating profit increased 19.0% primarily due to the gain recognized during the period, higher utility structures and wind towers volumes, and the impact of the acquired Ameron business, partially offset by lower margins in our utility structures business and driven by product mix.

Unsatisfied Performance Obligations (Backlog)

As of June 30, 2024, the backlog for utility, wind, and related structures was $1,338.7 million, compared to $1,367.5 million and $1,507.4 million as of December 31, 2023 and June 30, 2023, respectively. Approximately 37% of these unsatisfied performance obligations are expected to be delivered during 2024, approximately 32% during 2025, and the remainder are expected to be delivered through 2028.

Transportation Products

($ in millions)

($ in millions)

(1) Depreciation and amortization are components of operating profit.

Three Months Ended June 30, 2024 versus Three Months Ended June 30, 2023

• Revenues were substantially unchanged as an increase in inland barge revenues of 4.4%, driven by higher hopper barge deliveries, was offset by a decrease in steel components revenues 5.9% due to a decline in volumes.
• Cost of revenues were roughly flat, in line with the change in revenues. As a percentage of revenues, cost of revenues was 83.0% both periods.
• Selling, general, and administrative expenses decreased 10.7% primarily due to expenses from participation in trade remedy proceedings involving certain imports of freight rail couplers from China and Mexico incurred in the prior year. As a percentage of revenues, selling, general, and administrative expenses decreased to 5.9%, compared to 6.6% in the prior period.
• Operating profit increased 8.6%, outpacing the percentage increase in revenues, driven by higher hopper barge volumes and a decrease in selling, general, and administrative costs, partially offset by lower steel component volumes.

Six Months Ended June 30, 2024 versus Six Months Ended June 30, 2023

• Revenues increased 5.1% due to higher volumes and improved pricing of inland barges, partially offset by lower steel components volumes.
• Cost of revenues increased 3.4% driven by higher barge volumes partially offset by lower steel component volumes. As a percentage of revenues, cost of revenues decreased to 82.5% in the current period, compared to 83.9% in the prior period.
• Selling, general, and administrative expenses decreased 3.7% primarily due to expenses from participation in trade remedy proceedings involving certain imports of freight rail couplers from China and Mexico incurred in the prior year. As a percentage of revenues, selling, general, and administrative expenses decreased 5.7%, compared to 6.2% in the prior period.
• Operating profit increased 25.3%, outpacing the percentage increase in revenues, driven by higher hopper barge volumes and a decrease in selling, general, and administrative costs, partially offset by lower steel component volumes.

Unsatisfied Performance Obligations (Backlog)

As of June 30, 2024, the backlog for inland barges was $251.5 million, compared to $253.7 million and $287.1 million as of December 31, 2023 and June 30, 2023, respectively. Approximately 69% of unsatisfied performance obligations for inland barges are expected to be delivered during 2024, and the remainder are expected to be delivered in 2025.

Corporate

(in millions)

(in millions)

Three Months Ended June 30, 2024 versus Three Months Ended June 30, 2023

• Corporate overhead costs increased 19.2% primarily due to higher acquisition and divestiture-related expenses of $3.9 million, compared to $0.3 million for the same period in 2023.

Six Months Ended June 30, 2024 versus Six Months Ended June 30, 2023

• Corporate overhead costs increased 16.4% primarily due to higher acquisition and divestiture-related expenses of $5.5 million, compared to $0.9 million for the same period in 2023.

Liquidity and Capital Resources

Arcosa’s primary liquidity requirement consists of funding our business operations, including capital expenditures, working capital investment, and disciplined acquisitions. Our primary sources of liquidity include cash flow from operations, our existing cash balance, availability under the revolving credit facility, and, as necessary, the issuance of additional long-term debt or equity. To the extent we have available liquidity, we may also consider undertaking new capital investment projects, executing additional strategic acquisitions, returning capital to stockholders, or funding other general corporate purposes.

Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities for the six months ended June 30, 2024 and 2023:

(in millions)

Operating Activities. Net cash provided by operating activities for the six months ended June 30, 2024 was $118.8 million, compared to $154.9 million for the six months ended June 30, 2023.

• The changes in current assets and liabilities resulted in a net use of cash of $44.7 million for the six months ended June 30, 2024, compared to a net use of cash of $14.4 million for the six months ended June 30, 2023. The current year activity was primarily driven by increased receivables, partially offset by decreased inventories.

Investing Activities. Net cash required by investing activities for the six months ended June 30, 2024 was $241.2 million, compared to $86.1 million for the six months ended June 30, 2023.

• Capital expenditures for the six months ended June 30, 2024 were $102.0 million, compared to $96.9 million for the same period last year with the increase primarily driven by various growth projects within the Construction Products and Engineered Structures segments. Full-year capital expenditures are expected to be approximately $190 to $205 million in 2024.
• Proceeds from the sale of property, plant, and equipment and other assets totaled $7.4 million for the six months ended June 30, 2024, compared to $24.4 million for the same period in 2023.
• Cash paid for acquisitions, net of cash acquired, was $179.9 million for the six months ended June 30, 2024, compared to $15.6 million for the same period in 2023.
• Proceeds from the sale of businesses was $33.3 million during the six months ended June 30, 2024, compared to $2.0 million for the same period in 2023.

Financing Activities. Net cash provided by financing activities during the six months ended June 30, 2024 was $121.3 million, compared to net cash required by financing activities of $31.3 million for the same period in 2023.

• Current year activity was primarily driven by net borrowings of $136.6 million under the revolving credit facility to fund recent acquisitions, offset by the purchase of shares to satisfy employee taxes on vested stock and dividends paid during the period.

Other Investing and Financing Activities

Revolving Credit Facility and Senior Notes

On August 23, 2023, we entered into a Second Amended and Restated Credit Agreement to increase the revolving credit facility from $500.0 million to $600.0 million, extend the maturity date of the revolving credit facility from January 2, 2025 to August 23, 2028, and refinance and repay in full the remaining balance of the term loan then outstanding under the prior credit facility.

In April 2024, we borrowed an additional $160.0 million under our revolving credit facility to fund, in part, the acquisition of Ameron, of which $60.0 million was repaid during the three months ended June 30, 2024. As of June 30, 2024, we had $300.0 million of outstanding loans borrowed under the revolving credit facility, and there were approximately $10.7 million of letters of credit issued, leaving $289.3 million available for borrowing. Of the outstanding letters of credit as of June 30, 2024, $10.7 million are expected to expire in 2025. The majority of our letters of credit obligations support the Company’s various insurance programs and generally renew by their terms each year.

The interest rates under the revolving credit facility are variable based on the daily simple or term Secured Overnight Financing Rate ("SOFR"), plus a 10-basis point credit spread adjustment, or an alternate base rate, in each case plus a margin for borrowing. A commitment fee accrues on the average daily unused portion of the revolving facility. The margin for borrowing and commitment fee rate are determined based on Arcosa’s leverage as measured by a consolidated total indebtedness to consolidated EBITDA ratio. The margin for borrowing based on SOFR ranges from 1.25% to 2.00% and was set at 1.50% as of June 30, 2024. The commitment fee rate ranges from 0.20% to 0.35% and was set at 0.25% as of June 30, 2024.

The Company's revolving credit facility requires the maintenance of certain ratios related to leverage and interest coverage. As of June 30, 2024, we were in compliance with all such financial covenants. Borrowings under the revolving credit facility are guaranteed by certain domestic subsidiaries of the Company.

On April 6, 2021, the Company issued $400.0 million aggregate principal amount of 4.375% senior notes (the “Notes”) that mature in April 2029. Interest on the Notes is payable semiannually in April and October. The Notes are senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by each of the Company’s domestic subsidiaries that is a guarantor under our revolving credit facility.

We believe, based on our current business plans, that our existing cash, available liquidity, and cash flow from operations will be sufficient to fund necessary capital expenditures and operating cash requirements for the foreseeable future.

Dividends and Repurchase Program

In June 2024, the Company declared a quarterly cash dividend of $0.05 per share that was paid on July 31, 2024.

In December 2022, the Board authorized a new $50.0 million share repurchase program effective January 1, 2023 through December 31, 2024 to replace a program of the same amount that expired on December 31, 2022. For the three and six months ended June 30, 2024, the Company did not repurchase any shares. As of June 30, 2024, the Company had a remaining authorization of $36.2 million under the program. See Note 1 Overview and Summary of Significant Accounting Policies to the Consolidated Financial Statements.

Recent Accounting Pronouncements

See Note 1 Overview and Summary of Significant Accounting Policies to the Consolidated Financial Statements for information about recent accounting pronouncements.

Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not historical facts are forward-looking statements and involve risks and uncertainties. These forward-looking statements include expectations, beliefs, plans, objectives, future financial performances, estimates, projections, goals, and forecasts. Arcosa uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “plans,” and similar expressions to identify these forward-looking statements. Potential factors, which could cause our actual results of operations to differ materially from those in the forward-looking statements include, among others:

• the impact of pandemics, epidemics, or other public health emergencies on our sales, operations, supply chain, employees, and financial condition;
• market conditions and customer demand for our business products and services;
• the cyclical and seasonal nature of the industries in which we compete;
• variations in weather in areas where our construction products are sold, used, or installed;
• naturally occurring events and other events and disasters causing disruption to our manufacturing, product deliveries, and production capacity, thereby giving rise to an increase in expenses, loss of revenue, and property losses;
• competition and other competitive factors;
• our ability to identify, consummate, or integrate acquisitions of new businesses or products, or divest any business;
• the timing of introduction of new products;
• the timing and delivery of customer orders or a breach of customer contracts;
• the credit worthiness of customers and their access to capital;
• product price changes;
• changes in mix of products sold;
• the costs incurred to align manufacturing capacity with demand and the extent of its utilization;
• the operating leverage and efficiencies that can be achieved by our manufacturing businesses;
• availability and costs of steel, component parts, supplies, and other raw materials;
• changing technologies;
• surcharges and other fees added to fixed pricing agreements for steel, component parts, supplies and other raw materials;
• increased costs due to increased inflation;
• interest rates and capital costs;
• counter-party risks for financial instruments;
• long-term funding of our operations;
• taxes;
• material nonpayment or nonperformance by any of our key customers;
• the stability of the governments and political and business conditions in certain foreign countries, particularly Mexico;
• public infrastructure expenditures;
• changes in import and export quotas and regulations;
• business conditions in emerging economies;
• costs and results of litigation;
• changes in accounting standards or inaccurate estimates or assumptions in the application of accounting policies;
• legal, regulatory, and environmental issues, including compliance of our products with mandated specifications, standards, or testing criteria and obligations to remove and replace our products following installation or to recall our products and install different products manufactured by us or our competitors;
• actions by the executive and legislative branches of the U.S. government relative to federal government budgeting, taxation policies, government expenditures, U.S. borrowing/debt ceiling limits, and trade policies, including tariffs, and border closures;
• the inability to sufficiently protect our intellectual property rights;
• our ability to mitigate against cybersecurity incidents, including ransomware, malware, phishing emails, and other electronic security threats;
• if the Company's sustainability efforts are not favorably received by stockholders;
• if the Company does not realize some or all of the benefits expected from certain provisions of the IRA, including the AMP tax credits for wind towers, which remain subject to the issuance of additional guidance and clarification; and
• the delivery or satisfaction of any backlog or firm orders.

Any forward-looking statement speaks only as of the date on which such statement is made. Arcosa undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made. For a discussion of risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see Item 1A, “Risk Factors” in our 2023 Annual Report on Form 10-K and future Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

There has been no material change in our market risks since December 31, 2023 as set forth in our 2023 Annual Report on Form 10-K. See Note 9 Other, Net of the Notes to the Consolidated Financial Statements for the impact of foreign exchange rate fluctuations for the three and six months ended June 30, 2024.

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures designed to ensure that it is able to collect and record the information it is required to disclose in the reports it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) with the Securities and Exchange Commission (“SEC”), to process, summarize, and disclose this information within the time periods specified in the rules of the SEC, and that such information is accumulated and communicated to management, including our Chief Executive and Chief Financial Officers, in a timely fashion. The Company’s Chief Executive and Chief Financial Officers are responsible for establishing and maintaining these disclosure controls and procedures and evaluating their effectiveness (as defined in Rule 13(a)-15l under the Exchange Act). Based on their evaluation of the Company’s disclosure controls and procedures that took place as of the end of the period covered by this report, the Chief Executive and Chief Financial Officers believe that these disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

During the period covered by this report, there have been no changes in the Company’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

As permitted by the SEC Staff interpretive guidance for recently acquired businesses, management's assessment and conclusion on the effectiveness of the Company's disclosure controls and procedures as of June 30, 2024 excludes an assessment of the internal control over financial reporting of the Ameron business acquired in April 2024. Ameron represents approximately 5% of consolidated total assets and 2% of consolidated revenues as of and for the six months ended June 30, 2024.

There have been no material changes in the Company's risk factors from those set forth in our 2023 Annual Report on Form 10-K.