Arcosa, Inc.: Form 10-Q for the period ended Sep 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 September 30, 2024 provides good production visibility for the remainder of 2024 and into 2025. 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 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 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 September 30, 2024 was $244.7 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 due to high steel prices throughout 2022 and 2023. 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 third quarter, we received orders of $75 million for tank and hopper barges.

Executive Overview

Recent Developments

In October 2024, the Company completed the acquisition of 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 MSA through its network of five hard rock natural aggregates quarries, twelve asphalt plants, and three recycled aggregates sites. The purchase price was funded with a $700.0 million secured term loan facility (the “Term Loan”) that matures in October 2031 and $600.0 million of 6.875% senior notes (the "2024 Notes") that matures in August 2032.

In August 2024, the Company completed the sale of its steel components business. Previously reported in the Transportation Products segment, the steel components business is a leading supplier of railcar coupling devices, railcar axles, and circular forgings. The total consideration for the divestiture was $110.0 million consisting of $55.0 million in cash, a $25.0 million seller's note and a $30.0 million earnout of which the estimated fair value as of September 30, 2024 was $14.1 million. During the three months ended September 30, 2024, the Company recognized a loss of $23.0 million on the sale of the business which is reflected in (gain) loss on sale of businesses on the Consolidated Statement of Operations.

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 nine months ended September 30, 2024 increased by 8.2% and 10.3% to $640.4 million and $1,903.7 million, respectively, from the same periods in 2023, due to higher revenues in our Engineered Structures and Construction Products segments, partially offset by lower revenues in Transportation Products due to the divestiture of our steel components business.
• Operating profit for the three months ended September 30, 2024 decreased by $14.6 million to $33.8 million primarily due to the $23.0 million loss on the sale of the steel components business. Excluding the loss, operating profit increased $8.4 million. For the nine months ended September 30, 2024, excluding the $21.8 million gain on the sale of depleted land in the prior period, operating profit increased by $1.7 million to $154.4 million.
• Selling, general, and administrative expenses increased by 34.4% and 18.8% for the three and nine months ended September 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 12.9% and 12.1% for the three and nine months ended September 30, 2024, respectively, compared to 10.4% and 11.3% for the same periods in 2023, respectively.
• The effective tax rate for the three and nine months ended September 30, 2024 was 13.1% and 15.2%, respectively, compared to 17.4% and 17.1%, respectively, for the same periods in 2023. See Note 10 Income Taxes to the Consolidated Financial Statements.
• Net income for the three and nine months ended September 30, 2024 was $16.6 million and $101.4 million, respectively, compared to $35.5 million and $132.1 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 September 30, 2024, December 31, 2023, and September 30, 2023, our unsatisfied performance obligations, or backlog, were as follows:

(in millions)

Approximately 20% of the unsatisfied performance obligations for utility, wind, and related structures in our Engineered Structures segment are expected to be delivered during 2024, approximately 47% are expected to be delivered during 2025 and the remainder are expected to be delivered through 2028. Approximately 32% 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 8.2% and 10.3% during the three and nine months ended September 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 recently acquired Ameron business.
• Revenues from Transportation Products decreased due to the sale of the steel components business which was completed on August 16, 2024, partially offset by higher barge revenues.

Operating Costs

(in millions)

(in millions)

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

2024 versus 2023

• Operating costs increased by 11.7% and 12.8% during the three and nine months ended September 30, 2024, respectively.
• Operating costs for Construction Products decreased for the three months ended September 30, 2024 driven by lower organic volumes and operating improvements in our specialty materials and trench shoring businesses. Operating costs for the nine months ended September 30, 2024 increased primarily due to increased costs from the recently acquired businesses and a $21.8 million gain on the sale of depleted land that was netted against operating costs in the prior period.
• 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 increased for the three and nine months ended September 30, 2024 primarily due to higher volumes in inland barge and a $23.0 million loss recognized on the sale of the steel components business, partially offset by lower steel components volumes.
• Depreciation, depletion, and amortization expense increased as a result of recent acquisitions and organic growth investments.
• Selling, general, and administrative expenses increased by 34.4% and 18.8% for the three and nine months ended September 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 12.9% and 12.1% for the three and nine months ended September 30, 2024, respectively, compared to 10.4% and 11.3% for the same periods in 2023, respectively.

Operating Profit (Loss)

(in millions)

(in millions)

2024 versus 2023

• Operating profit decreased 30.2% for the three months ended September 30, 2024 primarily due to the $23.0 million loss recognized on the sale of the steel components business in the current period. Operating profit decreased 11.5% for the nine months ended September 30, 2024 primarily due to the $21.8 million land sale gain in the prior year.
• Operating profit in Construction Products increased for the three months ended September 30, 2024 primarily due to the accretive impact of recent acquisitions and higher pricing and operating improvements in our legacy operations. For the nine months ended September 30, 2024, operating profit increased 17.5% excluding the $21.8 million land sale gain in the prior year.
• Operating profit in Engineered Structures increased for the three and nine months ended September 30, 2024 due to higher wind towers volumes, operating improvements in our utility structures business and the accretive impact of the acquired Ameron business.
• Excluding the loss on the sale of the steel components business, operating profit in Transportation Products decreased for the three months ended September 30, 2024 due to lower steel components volumes partially offset by higher barge volumes, and was roughly flat for the nine months ended September 30, 2024 as higher barge volumes were mostly offset by lower steel component volumes.

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 nine months ended September 30, 2024 was 13.1% and 15.2%, respectively, compared to 17.4% and 17.1%, respectively, for the same periods in 2023. The change in the tax rate for the three and nine months ended September 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 September 30, 2024 versus Three Months Ended September 30, 2023

• Revenues increased 1.4% primarily due to recent acquisitions. Organic revenues in our aggregates and specialty materials businesses were down slightly as lower volumes, a decrease in freight revenue, and a reduction in revenue from recently divested operations was partially offset by higher pricing. Revenues in our trench shoring business decreased 5.8% primarily due to reduced steel prices and lower volumes.
• Cost of revenues decreased 4.4% primarily due to lower organic volumes in our aggregates and specialty materials businesses and operating improvements in our specialty materials and trench shoring businesses. The decrease was partially offset by increased costs from recently acquired businesses, including higher depreciation, depletion, and amortization expense. As a percentage of revenues, cost of revenues decreased to 75.2% in the current period, compared to 79.8% in the prior period.
• Selling, general, and administrative expenses increased 11.1% due to additional costs from recently acquired businesses and higher compensation-related costs. Selling, general, and administrative expenses as a percentage of revenues was 10.5% in the current period, compared to 9.6% in the prior period.
• Operating profit increased 33.3% due to the accretive impact of recent acquisitions, recent divestiture of underperforming operations, increased unit profitability in our aggregates business, and operating improvements in our specialty materials business and trench shoring businesses.
• Depreciation, depletion, and amortization expense increased 6.3% primarily due to the fair market value write-up of long-lived assets from recent acquisitions and organic growth investments.

Nine Months Ended September 30, 2024 versus Nine Months Ended September 30, 2023

• Revenues increased 4.0% primarily due to recent acquisitions. Organic revenues in our aggregates and specialty materials businesses were down slightly as lower volumes, a decrease in freight revenue, and a reduction in revenue from recently divested operations was partially offset by higher pricing. Revenues from our trench shoring business increased 5.5% driven by revenues from higher organic volumes and the acquisition completed in the first quarter of 2023.
• Cost of revenues increased 2.2% primarily due to increased costs from the recently acquired businesses, including higher depreciation, depletion, and amortization expense and $1.7 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 76.5% in the current period, compared to 77.8% in the prior period.
• Selling, general, and administrative expenses increased 5.1% due to additional costs from recently acquired businesses and higher compensation-related costs. Selling, general, and administrative expenses as a percentage of revenues was 10.7% in the current period, compared to 10.6% in the prior period.
• During the period, the Construction Products 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 decreased 4.9% primarily due to a $21.8 million gain on the sale of depleted land in the prior period. Excluding the gain, operating profit increased 17.5% driven by the accretive impact of recent acquisitions, recent divestiture of underperforming operations, increased unit profitability in our aggregates business, and operating improvements in our specialty materials business and trench shoring businesses.
• 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 September 30, 2024 versus Three Months Ended September 30, 2023

• Revenues increased 25.6% primarily due to higher volumes in our wind towers business and the contribution from the acquired Ameron business. Revenues for utility structures increased slightly as higher volumes and improved product mix was mostly offset by lower steel prices.
• Cost of revenues increased 18.3% primarily due to increased costs from the acquired Ameron business and higher wind towers volumes. Costs of revenues also increased due to additional expenses incurred related to the startup of two new facilities: a concrete utility structures plant and a wind tower plant.
• Selling, general, and administrative expenses increased 54.5% primarily due to additional costs from the acquired Ameron business and higher compensation-related costs in utility structures.
• Operating profit increased 74.3% primarily due to higher wind tower volumes, operating improvements in our utility structures business and the accretive impact of the recently acquired Ameron business.
• Depreciation and amortization expense increased primarily due to the acquired Ameron business and organic growth investments.

Nine Months Ended September 30, 2024 versus Nine Months Ended September 30, 2023

• Revenues increased 23.3% 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 22.0% 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.
• Selling, general, and administrative expenses increased 37.2% 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 33.7% 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 driven by product mix.

Unsatisfied Performance Obligations (Backlog)

As of September 30, 2024, the backlog for utility, wind, and related structures was $1,264.6 million, compared to $1,367.5 million and $1,450.8 million as of December 31, 2023 and September 30, 2023, respectively. Approximately 20% of these unsatisfied performance obligations are expected to be delivered during 2024, approximately 47% 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 September 30, 2024 versus Three Months Ended September 30, 2023

• Revenues decreased 11.2% primarily due to the sale of the steel components business which was completed on August 16, 2024. Inland barge revenues increased 21.1%, driven by higher tank barge deliveries.
• Cost of revenues decreased 7.1% driven by lower steel components volumes due to the divestiture, partially offset by higher cost of revenues for the inland barge business due to higher volumes.
• Selling, general, and administrative expenses decreased 8.6% primarily due to the divestiture of the steel components business, partially offset by higher compensation-related expenses for the inland barge business.
• Operating profit decreased significantly due to the $23.0 million loss recognized on the sale of the steel components business during the period. Excluding the loss, operating profit decreased $5.3 million due to lower steel components volumes, partially offset by higher operating profit for the barge business driven by higher volumes.

Nine Months Ended September 30, 2024 versus Nine Months Ended September 30, 2023

• Revenues were roughly flat. Inland barge revenues increased 13.9%, driven by higher hopper barge deliveries. Revenues for steel components decreased due to the divestiture of the business during the third quarter.
• Cost of revenues were substantially unchanged as higher barge volumes were offset by lower steel components volumes. As a percentage of revenues, cost of revenues was 83.3% in the current period, compared to 83.1% in the prior period.
• Selling, general, and administrative expenses decreased 5.2% primarily due to divestiture of the steel components business, partially offset by higher compensation-related expenses for the inland barge business. As a percentage of revenues, selling, general, and administrative expenses was 5.6% in the current period, compared to 5.9% in the prior period.
• Operating profit decreased significantly due to the $23.0 million loss recognized on the sale of the steel components business during the period. Excluding the loss, operating profit increased $0.2 million as higher barge volumes were mostly offset by lower steel components volumes.

Unsatisfied Performance Obligations (Backlog)

As of September 30, 2024, the backlog for inland barges was $244.7 million, compared to $253.7 million and $240.4 million as of December 31, 2023 and September 30, 2023, respectively. Approximately 32% 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 September 30, 2024 versus Three Months Ended September 30, 2023

• Corporate overhead costs increased 70.1% primarily due to higher acquisition and divestiture-related expenses of $11.6 million, compared to $0.5 million for the same period in 2023.

Nine Months Ended September 30, 2024 versus Nine Months Ended September 30, 2023

• Corporate overhead costs increased 33.6% primarily due to higher acquisition and divestiture-related expenses of $17.1 million, compared to $1.4 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 nine months ended September 30, 2024 and 2023:

(in millions)

Operating Activities. Net cash provided by operating activities for the nine months ended September 30, 2024 was $253.8 million, compared to $198.8 million for the nine months ended September 30, 2023.

• The changes in current assets and liabilities resulted in a net source of cash of $5.3 million for the nine months ended September 30, 2024, compared to a net use of cash of $43.8 million for the nine months ended September 30, 2023. The current year activity was primarily driven by a net increase in liabilities and decreased inventories, partially offset by increased receivables.

Investing Activities. Net cash required by investing activities for the nine months ended September 30, 2024 was $250.6 million, compared to $131.5 million for the nine months ended September 30, 2023.

• Capital expenditures for the nine months ended September 30, 2024 were $136.4 million, compared to $144.8 million for the same period last year. Full-year capital expenditures are expected to be approximately $180 to $195 million in 2024.
• Proceeds from the sale of property, plant, and equipment and other assets totaled $14.0 million for the nine months ended September 30, 2024, compared to $30.1 million for the same period in 2023.
• Cash paid for acquisitions, net of cash acquired, was $214.6 million for the nine months ended September 30, 2024, compared to $18.8 million for the same period in 2023.
• Proceeds from the sale of businesses was $86.4 million during the nine months ended September 30, 2024, compared to $2.0 million for the same period in 2023.

Financing Activities. Net cash provided by financing activities during the nine months ended September 30, 2024 was $648.8 million, compared to net cash required by financing activities of $72.4 million for the same period in 2023.

• Current year activity was primarily driven by proceeds of $600.0 million received from the issuance of the 2024 Notes and net borrowings of $80.0 million under the revolving credit facility, both 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, Term Loan, and Senior Notes

In August 2023, we entered into a Second Amended and Restated Credit Agreement ("the Credit Agreement") to increase our revolving credit facility from $500.0 million to $600.0 million, extend the maturity date of our 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 our prior credit facility. On August 15, 2024, we entered into an amendment to the Credit Agreement (the "Amended Credit Agreement") to, among other things, (i) increase our revolving credit facility from $600.0 million to $700.0 million, (ii) collateralize the amended revolving credit facility with substantially all of our and our subsidiary guarantors' personal property (with certain exceptions), (iii) make the applicable margin for revolving borrowings, letters of credit and the commitment fee rate be based on our consolidated net leverage ratio (permitting up to $150.0 million of unrestricted cash to be netted from the calculation thereof), (iv) modify the margin for SOFR-based revolving borrowings and letters of credit to range from 1.25% to 2.50% per annum, (v) modify the margin for base rate revolving borrowings to range from 0.25% to 1.50%, (vi) modify the commitment fee that accrues on the unused portion of the revolving credit facility to range from 0.20% to 0.45%, and (vii) modify the maximum permitted leverage to include a net debt concept (permitting up to $150.0 million of unrestricted cash to be netted from the calculation thereof), and to provide that such ratio shall be no greater than 5.00 to 1.00 during the fourth quarter of 2024 and the next two fiscal quarters, 4.50 to 1.00 for the next following two fiscal quarters, and 4.00 to 1.00 for each fiscal quarter thereafter (however, this maximum permitted leverage ratio may be increased to 4.50 to 1.00 for up to four fiscal quarters if a material acquisition is entered into). These amendments did not become effective until the closing of the Stavola acquisition on October 1, 2024. The amended revolving credit facility's maturity date of August 23, 2028 remains unchanged.

As of September 30, 2024, we had $240.0 million of outstanding loans borrowed under our revolving credit facility. During the nine months ended September 30, 2024, the amount of outstanding loans borrowed increased $80.0 million primarily due to $160.0 million borrowed in April 2024 to fund, in part, the acquisition of Ameron, of which $60.0 million was repaid during the three months ended June 30, 2024. Additionally, as of September 30, 2024, prior to the effectiveness of the Amended Credit Agreement, there were approximately $0.7 million of letters of credit outstanding under our revolving credit facility that will expire in 2025, which left $359.3 million available for borrowing. 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 rate for revolving loans under the Amended Credit Agreement are variable based on the daily simple or term Secured Overnight Financing Rate ("SOFR"), plus 10-basis points, 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 credit facility. The margin for revolving borrowings and commitment fee rate are determined based on the Company’s Consolidated Total Net Leverage Ratio (as measured by a consolidated funded indebtedness, less the aggregate amount of unrestricted cash up to a maximum amount not to exceed $150.0 million, to consolidated EBITDA ratio). As of September 30, 2024, prior to the effectiveness of the Amended Credit Agreement, the margin for borrowing based on SOFR was set at 1.50% and the commitment fee rate was set at 0.25%.

The revolving credit facility portion of the Amended Credit Agreement requires the maintenance of certain ratios related to leverage and interest coverage. As of September 30, 2024, we were in compliance with all such financial covenants. Borrowings under the Credit Agreement are guaranteed by certain domestic subsidiaries of the Company. On October 1, 2024, we collateralized our obligations under the Amended Credit Agreement with substantially all of our and our subsidiary guarantors' personal property (with certain exceptions).

The Amended Credit Agreement provides for a new secured term loan facility (the “Term Loan”) in an aggregate principal amount of $700.0 million. The Term Loan was funded on October 1, 2024 with the closing of the Stavola acquisition. The Term Loan requires, among other things (i) mandatory prepayments from excess cash flow on an annual basis, commencing with the fiscal year ending December 31, 2025, (ii) mandatory prepayments with proceeds of certain asset sales and debt issuances, and (iii) quarterly principal amortization payments in an amount equal to 0.25% of the initial Term Loan. The Term Loan has a maturity date of October 1, 2031. The interest rate for the Term Loan is based on SOFR plus 2.25% per year. The Term Loan is prepayable at any time without penalty, except in the event of a voluntary repricing in the first six months after closing, in which case a premium in the amount of 1.0% of the initial Term Loan is payable. The Term Loan is guaranteed by the same subsidiaries of the Company that guarantee our revolving credit facility, and the Term Loan is secured on a pari passu basis with our revolving credit facility.

On August 26, 2024, the Company issued $600.0 million aggregate principal amount of 6.875% senior notes (the "2024 Notes") that mature in August 2032. Interest on the 2024 Notes is payable semiannually in February and August. In April 2021, the Company issued $400.0 million aggregate principal amount of 4.375% senior unsecured notes (the "2021 Notes", and together with the 2024 Notes, the "Senior Notes") that mature in April 2029. Interest on the 2021 Notes is payable semiannually in April and October. The Senior 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 Amended Revolving Credit Facility. The terms of each indenture governing the Senior Notes, among other things, limit the ability of the Company and each of its subsidiaries to create liens on assets, enter into sale and leaseback transactions, and consolidate, merge or transfer all or substantially all of its assets and the assets of its subsidiaries. The terms of each indenture also limit the ability of the Company’s non-guarantor subsidiaries to incur certain types of debt.

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 September 2024, the Company declared a quarterly cash dividend of $0.05 per share that is scheduled to be paid on October 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 nine months ended September 30, 2024, the Company did not repurchase any shares. As of September 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 to the Consolidated Financial Statements for the impact of foreign exchange rate fluctuations for the three and nine months ended September 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 September 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 nine months ended September 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.