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Form 10-Q

(Mark One)
☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

			OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Delaware									82-5339416
(State or Other Jurisdiction of Incorporation or Organization)									(I.R.S. Employer Identification No.)
500 N. Akard Street, Suite 400
Dallas,			Texas						75201
(Address of principal executive offices)									(Zip Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock ($0.01 par value)			ACA			New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ  No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes þ   No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 þ 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 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No þ

At July 15, 2021, the number of shares of common stock outstanding was 48,400,823.

 

Caption			Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements			3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosures about Market Risk			35
Item 4. Controls and Procedures			36
PART II OTHER INFORMATION
Item 1. Legal Proceedings			37
Item 1A. Risk Factors			37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			37
Item 3. Defaults Upon Senior Securities			37
Item 4. Mine Safety Disclosures			37
Item 5. Other Information			37
Item 6. Exhibits			38
SIGNATURES			39

Item 1. Financial Statements

(unaudited)

			Three Months Ended June 30,												Six Months Ended June 30,
			2021						2020						2021						2020
			(in millions)
Revenues			$	515.1					$	498.5					$	955.5					$	986.7
Operating costs:
Cost of revenues			417.4						396.8						778.5						788.1
Selling, general, and administrative expenses			66.4						53.9						122.8						105.7
			483.8						450.7						901.3						893.8
Total operating profit			31.3						47.8						54.2						92.9
Interest expense			6.6						2.8						8.7						6.1
Other, net (income) expense			(0.3)						(0.1)						0.2						(0.3)
Income before income taxes			25.0						45.1						45.3						87.1
Provision for income taxes			4.2						11.8						8.6						22.2
Net income			$	20.8					$	33.3					$	36.7					$	64.9
Net income per common share:
Basic			$	0.43					$	0.69					$	0.76					$	1.34
Diluted			$	0.43					$	0.68					$	0.75					$	1.33
Weighted average number of shares outstanding:
Basic			48.1						47.9						48.0						47.9
Diluted			48.6						48.4						48.5						48.4
Dividends declared per common share			$	0.05					$	0.05					$	0.10					$	0.10

(unaudited)

			Three Months Ended June 30,												Six Months Ended June 30,
			2021						2020						2021						2020
			(in millions)
Net income			$	20.8					$	33.3					$	36.7					$	64.9
Other comprehensive income (loss):
Derivative financial instruments:
Unrealized gains (losses) arising during the period, net of tax expense (benefit) of $0.0, ($0.2), $0.2, and ($1.1)			0.3						(0.5)						0.8						(3.9)
Reclassification adjustments for losses included in net income, net of tax expense (benefit) of ($0.1), ($0.1), ($0.2), and ($0.2)			0.3						0.4						0.7						0.6
Currency translation adjustment:
Unrealized gains (losses) arising during the period, net of tax expense (benefit) of $0.1, $0.0, $0.1, and ($0.2)			0.2						0.4						0.3						(0.7)
			0.8						0.3						1.8						(4.0)
Comprehensive income			$	21.6					$	33.6					$	38.5					$	60.9

			June 30, 2021						December 31, 2020
			(unaudited)
			(in millions)
ASSETS
Current assets:
Cash and cash equivalents			$	100.3					$	95.8
Receivables, net of allowance			314.3						260.2
Inventories:
Raw materials and supplies			160.3						114.6
Work in process			51.6						44.4
Finished goods			127.2						117.8
			339.1						276.8
Other			30.3						32.1
Total current assets			784.0						664.9
Property, plant, and equipment, net			1,206.7						913.3
Goodwill			806.2						794.0
Intangibles, net			227.3						212.9
Deferred income taxes			15.0						15.4
Other assets			51.0						46.2
			$	3,090.2					$	2,646.7
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable			$	201.3					$	144.1
Accrued liabilities			121.3						115.2
Advance billings			21.6						44.7
Current portion of long-term debt			8.8						6.3
Total current liabilities			353.0						310.3
Debt			645.1						248.2
Deferred income taxes			92.6						112.7
Other liabilities			79.0						83.3
			1,169.7						754.5
Stockholders’ equity:
Common stock – 200.0 shares authorized			0.5						0.5
Capital in excess of par value			1,688.8						1,694.1
Retained earnings			251.5						219.7
Accumulated other comprehensive loss			(20.3)						(22.1)
Treasury stock			—						—
			1,920.5						1,892.2
			$	3,090.2					$	2,646.7

(unaudited)

			Six Months Ended June 30,
			2021						2020
			(in millions)
Operating activities:
Net income			$	36.7					$	64.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization			68.0						54.7
Stock-based compensation expense			8.8						8.8
Provision for deferred income taxes			6.1						2.4
Gains on disposition of property and other assets			(5.3)						(1.8)
(Increase) decrease in other assets			2.8						(2.1)
Increase (decrease) in other liabilities			(12.1)						(1.8)
Other			(1.6)						2.1
Changes in current assets and liabilities:
(Increase) decrease in receivables			(29.4)						12.3
(Increase) decrease in inventories			(38.7)						(14.7)
(Increase) decrease in other current assets			(4.1)						11.8
Increase (decrease) in accounts payable			49.8						9.1
Increase (decrease) in advance billings			(23.1)						(26.9)
Increase (decrease) in accrued liabilities			(6.8)						1.5
Net cash provided by operating activities			51.1						120.3
Investing activities:
Proceeds from disposition of property and other assets			11.1						7.0
Capital expenditures			(41.5)						(43.6)
Acquisitions, net of cash acquired			(388.7)						(313.9)
Net cash required by investing activities			(419.1)						(350.5)
Financing activities:
Payments to retire debt			(1.9)						(100.7)
Proceeds from issuance of debt			400.0						250.3
Shares repurchased			(4.4)						(2.0)
Dividends paid to common shareholders			(4.9)						(4.9)
Purchase of shares to satisfy employee tax on vested stock			(9.7)						(3.3)
Debt issuance costs			(6.6)						(1.2)
Net cash provided by financing activities			372.5						138.2
Net increase (decrease) in cash and cash equivalents			4.5						(92.0)
Cash and cash equivalents at beginning of period			95.8						240.4
Cash and cash equivalents at end of period			$	100.3					$	148.4

(unaudited)

												Common Stock												Capital in Excess of Par Value						Retained Earnings						Accumulated Other Comprehensive Loss						Treasury Stock												Total Stockholders’ Equity
									Shares						$0.01 Par Value																								Shares						Amount
									(in millions, except par value)
Balances at March 31, 2020												48.3						$	0.5					$	1,690.5					$	152.0					$	(24.0)					(0.1)						$	(3.0)					$	1,816.0
Net income												—						—						—						33.3						—						—						—						33.3
Other comprehensive income												—						—						—						—						0.3						—						—						0.3
Cash dividends on common stock												—						—						—						(2.4)						—						—						—						(2.4)
Restricted shares, net												0.2						—						5.8						—						—						(0.1)						(4.0)						1.8
Retirement of treasury stock												(0.2)						—						(7.0)						—						—						0.2						7.0						—
Other												—						—						0.1						—						—						—						—						0.1
Balances at June 30, 2020												48.3						$	0.5					$	1,689.4					$	182.9					$	(23.7)					—						$	—					$	1,849.1
Balances at March 31, 2021												48.2						$	0.5					$	1,699.4					$	233.2					$	(21.1)					—						$	(0.7)					$	1,911.3
Net income												—						—						—						20.8						—						—						—						20.8
Other comprehensive income												—						—						—						—						0.8						—						—						0.8
Cash dividends on common stock												—						—						—						(2.5)						—						—						—						(2.5)
Restricted shares, net												0.4						—						4.1						—						—						(0.1)						(9.6)						(5.5)
Shares repurchased												—						—						—						—						—						(0.1)						(4.4)						(4.4)
Retirement of treasury stock												(0.2)						—						(14.7)						—						—						0.2						14.7						—
Balances at June 30, 2021												48.4						$	0.5					$	1,688.8					$	251.5					$	(20.3)					—						$	—					$	1,920.5
Balances at December 31, 2019												48.3						$	0.5					$	1,686.7					$	122.9					$	(19.7)					—						$	—					$	1,790.4
Net income												—						—						—						64.9						—						—						—						64.9
Other comprehensive loss												—						—						—						—						(4.0)						—						—						(4.0)
Cash dividends on common stock												—						—						—						(4.9)						—						—						—						(4.9)
Restricted shares, net												0.2						—						10.5						—						—						(0.1)						(5.0)						5.5
Shares repurchased												—						—						—						—						—						(0.1)						(2.0)						(2.0)
Retirement of treasury stock												(0.2)						—						(7.0)						—						—						0.2						7.0						—
Other												—						—						(0.8)						—						—						—						—						(0.8)
Balances at June 30, 2020												48.3						$	0.5					$	1,689.4					$	182.9					$	(23.7)					—						$	—					$	1,849.1
Balances at December 31, 2020												48.2						$	0.5					$	1,694.1					$	219.7					$	(22.1)					—						$	—					$	1,892.2
Net income												—						—						—						36.7						—						—						—						36.7
Other comprehensive income												—						—						—						—						1.8						—						—						1.8
Cash dividends on common stock												—						—						—						(4.9)						—						—						—						(4.9)
Restricted shares, net												0.4						—						9.4						—						—						(0.1)						(10.3)						(0.9)
Shares repurchased												—						—						—						—						—						(0.1)						(4.4)						(4.4)
Retirement of treasury stock												(0.2)						—						(14.7)						—						—						0.2						14.7						—
Balances at June 30, 2021												48.4						$	0.5					$	1,688.8					$	251.5					$	(20.3)					—						$	—					$	1,920.5

Arcosa, Inc. and its consolidated subsidiaries (“Arcosa,” the “Company,” “we,” or “our”), headquartered in Dallas, Texas, is a provider of infrastructure-related products and solutions with leading brands serving construction, engineered structure, and transportation markets in North America. Arcosa is a Delaware corporation and was incorporated in 2018 in connection with the separation (the “Separation”) of Arcosa from Trinity Industries, Inc. (“Trinity” or “Former Parent”) on November 1, 2018 as an independent, publicly-traded company, listed on the New York Stock Exchange.

The accompanying Consolidated Financial Statements are unaudited and have been prepared from the books and records of Arcosa, Inc. and its consolidated subsidiaries. All normal and recurring adjustments necessary for a fair presentation of the financial position of the Company and the results of operations, comprehensive income/loss, and cash flows have been made in conformity with accounting principles generally accepted in the U.S. (“GAAP”). All significant intercompany accounts and transactions have been eliminated. Because of seasonal and other factors, including the unknown potential duration, spread, severity, and impact of the COVID-19 pandemic, Arcosa's business, financial condition, and results of operations for the three and six months ended June 30, 2021 may not be indicative of Arcosa's expected business, financial condition, and results of operations for the year ending December 31, 2021.

These interim financial statements and notes are condensed as permitted by the instructions to Form 10-Q and should be read in conjunction with the audited Consolidated and Combined Financial Statements of the Company included in its Annual Report on Form 10-K for the year ended December 31, 2020.

In December 2020, the Company’s Board of Directors (the “Board”) authorized a new $50 million share repurchase program effective January 1, 2021 through December 31, 2022 to replace a program of the same amount that expired on December 31, 2020. For the three and six months ended June 30, 2021, the Company repurchased 71,712 shares at a cost of $4.4 million. As of June 30, 2021, the Company had a remaining authorization of $45.6 million under the program.

Revenue is measured based on the allocation of the transaction price in a contract to satisfied performance obligations. The transaction price does not include any amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. The following is a description of principal activities from which the Company generates its revenue, separated by reportable segments. Payments for our products and services are generally due within normal commercial terms. For a further discussion regarding the Company’s reportable segments, see Note 4 Segment Information.

The Construction Products segment recognizes substantially all revenue when the customer has accepted the product and legal title of the product has passed to the customer.

Within the Engineered Structures segment, revenue is recognized for our wind tower, certain utility structure, and certain storage tank product lines over time as the products are manufactured using an input approach based on the costs incurred relative to the total estimated costs of production. We recognize revenue over time for these products as they are highly customized to the needs of an individual customer resulting in no alternative use to the Company if not purchased by the customer after the contract is executed, and we have the right to bill the customer for our work performed to date plus at least a reasonable profit margin for work performed. As of June 30, 2021, we had a contract asset of $37.9 million related to these contracts, compared to $82.8 million at December 31, 2020, which is included in receivables, net of allowance, within the Consolidated Balance Sheets. The decrease in the contract asset is attributed to large deliveries of finished structures to customers in the first quarter. For all other products, revenue is recognized when the customer has accepted the product and legal title of the product has passed to the customer.

The Transportation Products segment recognizes revenue when the customer has accepted the product and legal title of the product has passed to the customer.

Unsatisfied Performance Obligations

			Unsatisfied performance obligations at June 30, 2021
			Total Amount						Percent expected to be delivered in 2021
			(in millions)
Engineered Structures:
Utility, wind, and related structures			$	348.5					93		%
Storage tanks			$	30.3					100		%
Transportation Products:
Inland barges			$	139.4					66		%

Substantially all unsatisfied performance obligations beyond 2021 are expected to be delivered during 2022.

The liability method is used to account for income taxes. Deferred income taxes represent the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances reduce deferred tax assets to an amount that will more likely than not be realized.

The Company regularly evaluates the likelihood of realization of tax benefits derived from positions it has taken in various federal and state filings after consideration of all relevant facts, circumstances, and available information. For those tax positions that are deemed more likely than not to be sustained, the Company recognizes the benefit it believes is cumulatively greater than 50% likely to be realized. To the extent the Company were to prevail in matters for which accruals have been established or be required to pay amounts in excess of recorded reserves, the effective tax rate in a given financial statement period could be materially impacted.

The Company considers all highly liquid debt instruments to be cash and cash equivalents if purchased with a maturity of three months or less. Financial instruments that potentially subject the Company to a concentration of credit risk are primarily cash investments and receivables. The Company places its cash investments in bank deposits and highly-rated money market funds, and its investment policy limits the amount of credit exposure to any one commercial issuer. We seek to limit concentrations of credit risk with respect to receivables with control procedures that monitor the credit worthiness of customers, together with the large number of customers in the Company's customer base and their dispersion across different industries and geographic areas. As receivables are generally unsecured, the Company maintains an allowance for doubtful accounts based upon the expected credit losses. Receivable balances determined to be uncollectible are charged against the allowance. To accelerate the conversion to cash, the Company may sell a portion of its trade receivables to a third party. The Company has no continuing involvement or recourse related to these receivables once they are sold, and the impact of these transactions in the Company's Consolidated Statements of Operations for the three and six months ended June 30, 2021 was not significant. The carrying values of cash, receivables, and accounts payable are considered to be representative of their respective fair values.

The Company may, from time to time, use derivative instruments to mitigate the impact of changes in interest rates, commodity prices, or changes in foreign currency exchange rates. For derivative instruments designated as hedges, the Company formally documents the relationship between the derivative instrument and the hedged item, as well as the risk management objective and strategy for the use of the derivative instrument. This documentation includes linking the derivative to specific assets or liabilities on the balance sheet, commitments, or forecasted transactions. At the time a derivative instrument is entered into, and at least quarterly thereafter, the Company assesses whether the derivative instrument is effective in offsetting the changes in fair value or cash flows of the hedged item. Any change in the fair value of the hedged instrument is recorded in accumulated other comprehensive loss (“AOCL”) as a separate component of stockholders' equity and reclassified into earnings in the period during which the hedged transaction affects earnings. The Company monitors its derivative positions and the credit ratings of its counterparties and does not anticipate losses due to counterparties' non-performance.

Effective as of January 1, 2020, the Company adopted Accounting Standards Update No. 2016-13, “Financial Instruments - Credit Losses”, (“ASU 2016-13”), which amends the existing accounting guidance for recognizing credit losses on financial assets and certain other instruments not measured at fair value through net income, including financial assets measured at amortized cost, such as trade receivables and contract assets. ASU 2016-13 replaces the existing incurred loss impairment model with an expected credit loss model that requires consideration of a broader range of information to estimate expected credit losses over the lifetime of the asset. The adoption of this guidance did not have a material effect on the Company’s Consolidated Financial Statements.

Effective as of January 1, 2021, the Company adopted Accounting Standards Updated No. 2019-12, “Simplifying the Accounting for Income Taxes”, (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions to the general principles for income taxes. The adoption of this guidance did not have a material effect on the Company’s Consolidated Financial Statements.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2020-04, “Reference Rate Reform” (“ASU 2020-04”) which provides optional guidance for contract modifications, hedging accounting, and other transactions associated with the transition from reference rates that are expected to be discontinued. ASU 2020-04 is effective for all entities upon issuance through December 31, 2022. We are still evaluating the impact of adoption, but do not expect the guidance to have a material impact on our Consolidated Financial Statements.

2021 Acquisitions

On August 4, 2021, we completed the stock acquisition of Southwest Rock Products, LLC and affiliated entities (collectively “Southwest Rock”), which will be included in our Construction Products segment for a total purchase price of approximately $150 million. The acquisition will be recorded as a business combination and was funded with cash on hand and $100.0 million of borrowings under our revolving credit facility.

On April 9, 2021, we completed the stock acquisition of StonePoint Ultimate Holding, LLC and affiliated entities (collectively “StonePoint”), a top 25 U.S. construction aggregates company, which is included in our Construction Products segment. The purchase price of $374.8 million was funded with proceeds from a private offering of $400.0 million of 4.375% senior unsecured notes that closed on April 6, 2021. See Note 7 Debt for additional information. Transaction costs incurred related to the StonePoint acquisition were approximately $5.4 million and $6.9 million during the three and six months ended June 30, 2021, respectively. The acquisition was recorded as a business combination based on preliminary valuations of the assets acquired and liabilities assumed at their acquisition date fair value using level three inputs. We expect to complete our purchase price allocation as soon as reasonably possible, not to exceed one year from the acquisition date. Adjustments to the preliminary purchase price allocation could be material to the purchase price allocation, particularly with respect to our preliminary estimates of property, plant, and equipment, mineral reserves, and deferred income taxes. The following table represents our preliminary purchase price allocation as of June 30, 2021:

			(in millions)
Cash			$	1.0
Accounts receivable			18.8
Inventories			21.0
Property, plant, and equipment			71.9
Mineral reserves			227.1
Goodwill			12.6
Customer relationships			7.2
Deferred income taxes			28.4
Other assets			10.3
Accounts payable			(7.4)
Accrued liabilities			(9.1)
Other liabilities			(7.0)
Total net assets acquired			$	374.8

The goodwill acquired, none of which is tax deductible, primarily relates to StonePoint's market position and existing workforce. The customer relationship intangible has a weighted average useful life of 10 years. Revenues and operating profit (loss) included in the Consolidated Statement of Operations from the date of the acquisition were approximately $39.2 million and $(3.3) million during both the three and six months ended June 30, 2021.

The following table represents the unaudited pro-forma consolidated operating results of the Company as if the StonePoint acquisition had been completed on January 1, 2020. The unaudited pro-forma information makes certain adjustments to depreciation, depletion, and amortization expense to reflect the fair value recognized in the purchase price allocation, removes one-time transaction related costs, and aligns the Company's debt financing with that as of the acquisition date. The unaudited pro-forma information should not be considered indicative of the results that would have occurred if the acquisition had been completed on January 1, 2020, nor is such unaudited pro-forma information necessarily indicative of future results.

									Six Months Ended June 30, 2021						Year Ended December 31, 2020
									(in millions)
Revenues									$	1,001.8					$	2,080.0
Income before income taxes									$	48.4					$	135.5

In April 2021, we also completed the acquisition of certain assets and liabilities of a Dallas-Fort Worth, Texas based recycled aggregates business in our Construction Products segment. The purchase price of the acquisition was not significant.

2020 Acquisitions

On January 6, 2020, we completed the stock acquisition of Cherry Industries, Inc. and affiliated entities (collectively “Cherry”), a leading producer of natural and recycled aggregates in the Houston, Texas market, which is included in our Construction Products segment. The purchase price of $296.8 million was funded with a combination of cash on-hand, advances under a new $150.0 million five-year term loan, and future payments to the seller for a net cash paid of $284.1 million during the six months ended June 30, 2020. See Note 7 Debt for additional information on our credit facility. Non-recurring transaction and integration costs incurred related to the Cherry acquisition were approximately $0.7 million and $1.6 million during the three and six months ended June 30, 2020, respectively. The acquisition was recorded as a business combination with valuations of the assets acquired and liabilities at their acquisition date fair value using level three inputs, defined as unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. The following table represents our final purchase price allocation:

			(in millions)
Accounts receivable			$	30.5
Inventories			11.8
Property, plant, and equipment			58.8
Mineral reserves			17.2
Goodwill			133.3
Customer relationships			62.1
Permits			25.4
Other assets			4.3
Accounts payable			(7.5)
Accrued liabilities			(4.9)
Deferred taxes			(32.7)
Other liabilities			(1.5)
Total net assets acquired			$	296.8

The goodwill acquired, none of which is tax deductible, primarily relates to Cherry's market position and existing workforce. The customer relationship intangibles and permits were assigned weighted average useful lives of 14.9 years and 19.8 years, respectively. Revenues and operating profit included in the Consolidated Statement of Operations from the date of the acquisition were approximately $44.9 million and $8.1 million, respectively, during the three months ended June 30, 2020 and approximately $88.7 million and $13.8 million, respectively, during the six months ended June 30, 2020.

The following table represents the unaudited pro-forma consolidated operating results of the Company as if the Cherry acquisition had been completed on January 1, 2019. The unaudited pro-forma information makes certain adjustments to depreciation, depletion, and amortization expense to reflect the fair value recognized in the purchase price allocation, removes one-time transaction related costs, and aligns the Company's debt financing with that as of the acquisition date. The unaudited pro-forma information should not be considered indicative of the results that would have occurred if the acquisition had been completed on January 1, 2019, nor is such unaudited pro-forma information necessarily indicative of future results.

									Six Months Ended June 30, 2020						Year Ended December 31, 2019
									(in millions)
Revenues									$	986.7					$	1,916.9
Income before income taxes									$	90.6					$	163.8

In March 2020, we completed the acquisition of certain assets and liabilities of a traffic structures business in our Engineered Structures segment for a total purchase price of $25.5 million. The acquisition was recorded as a business combination based on valuations of the assets acquired and liabilities assumed at their acquisition date fair value using level three inputs. The valuation resulted in the recognition of $10.0 million of goodwill in our Engineered Structures segment. Such assets and liabilities were not significant in relation to assets and liabilities at the consolidated or segment level.

In June 2020, we completed the acquisition of certain assets and liabilities of a concrete poles business in our Engineered Structures segment. The purchase price of the acquisition was not significant.

In July 2020, we completed the acquisition of certain assets and liabilities of a telecommunication structures business in our Engineered Structures segment for a total purchase price of $27.8 million. The acquisition was recorded as a business combination based on valuations of the assets acquired and liabilities assumed at their acquisition date fair value using level three inputs. The valuation resulted in the recognition of $8.5 million of goodwill in our Engineered Structures segment. Such assets and liabilities were not significant in relation to assets and liabilities at the consolidated or segment level.

In August 2020, we completed the acquisition of certain assets and liabilities of a natural aggregates business in our Construction Products segment for a total purchase price of $25.8 million. The acquisition was recorded as a business combination based on valuations of the assets acquired and liabilities assumed at their acquisition date fair value using level three inputs. The valuation resulted in the recognition of $8.7 million of goodwill in our Construction Products segment. Such assets and liabilities were not significant in relation to assets and liabilities at the consolidated or segment level.

In October 2020, we completed the stock acquisition of Strata Materials, LLC (“Strata”), a leading provider of natural and recycled aggregates in the Dallas-Fort Worth, Texas area, which is included in our Construction Products segment for a total purchase price of $87.0 million. The acquisition was recorded as a business combination based on valuations of the assets acquired and liabilities assumed at their acquisition date fair value using level three inputs. The valuation resulted in the recognition of $51.6 million of permits with an initial weighted average useful life of 22.8 years and $3.8 million of goodwill in our Construction Products segment. The remaining assets and liabilities were not significant in relation to assets and liabilities at the consolidated or segment level.

In October 2020, we also completed the acquisition of certain assets and liabilities of a traffic structures business in our Engineered Structures segment. The purchase price of the acquisition was not significant.

Divestitures

There was no divestiture activity for the three and six months ended June 30, 2021 and 2020.

Assets and liabilities measured at fair value on a recurring basis are summarized below:

			Fair Value Measurement as of June 30, 2021
			Level 1						Level 2						Level 3						Total
			(in millions)
Assets:
Cash equivalents			$	45.0					$	—					$	—					$	45.0
Total assets			$	45.0					$	—					$	—					$	45.0
Liabilities:
Interest rate hedge(1)			$	—					$	5.5					$	—					$	5.5
Contingent consideration(2)			—						—						6.7						6.7
Total liabilities			$	—					$	5.5					$	6.7					$	12.2
			Fair Value Measurement as of December 31, 2020
			Level 1						Level 2						Level 3						Total
			(in millions)
Assets:
Cash equivalents			$	27.1					$	—					$	—					$	27.1
Total assets			$	27.1					$	—					$	—					$	27.1
Liabilities:
Interest rate hedge(1)			$	—					$	7.3					$	—					$	7.3
Contingent consideration(2)			—						—						9.8						9.8
Total liabilities			$	—					$	7.3					$	9.8					$	17.1

(1) Included in other liabilities on the Consolidated Balance Sheets.

(2) Current portion included in accrued liabilities and non-current portion included in other liabilities on the Consolidated Balance Sheets.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for that asset or liability in an orderly transaction between market participants on the measurement date. An entity is required to establish a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair values are listed below:

Level 1 – This level is defined as quoted prices in active markets for identical assets or liabilities. The Company’s cash equivalents are instruments of the U.S. Treasury or highly-rated money market mutual funds.

Level 2 – This level is defined as observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Interest rate hedges are valued at exit prices obtained from each counterparty. See Note 7 Debt.

Level 3 – This level is defined as unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Contingent consideration relates to estimated future payments owed to the sellers of businesses previously acquired. We estimate the fair value of the contingent consideration using a discounted cash flow model. The fair value is sensitive to changes in the forecast of sales and changes in discount rates and is reassessed quarterly based on assumptions used in our latest projections.

The Company reports operating results in three principal business segments:

Construction Products. The Construction Products segment produces and sells construction aggregates and related products, including natural and recycled aggregates and specialty materials, and manufactures and sells trench shields and shoring products and services for infrastructure-related projects.

Engineered Structures. The Company renamed this segment as of December 31, 2020 from Energy Equipment to better reflect the products delivered. There have been no changes to the businesses that have historically comprised this segment. The Engineered Structures segment manufactures and sells engineered structures primarily for infrastructure businesses, including utility structures for electricity transmission and distribution, structural wind towers, traffic structures, and telecommunication structures. These products share similar manufacturing competencies and steel sourcing requirements, and can be manufactured across our North American footprint. The segment also manufactures storage and distribution tanks.

Transportation Products. The Transportation Products segment manufactures and sells products for the inland waterway and rail transportation industries including barges, barge-related products, axles, and couplers.

The financial information for these segments is shown in the tables below. We operate principally in North America.

			Three Months Ended June 30,
			Revenues												Operating Profit (Loss)
			2021						2020						2021						2020
			(in millions)
Aggregates and specialty materials			$	181.5					$	132.1
Other			23.0						16.1
Construction Products			204.5						148.2						$	17.9					$	24.3
Utility, wind, and related structures			191.6						176.9
Storage tanks			50.9						45.9
Engineered Structures			242.5						222.8						29.1						20.9
Inland barges			49.0						107.0
Steel components			19.2						21.2
Transportation Products			68.2						128.2						1.3						15.9
Segment Totals before Eliminations and Corporate			515.2						499.2						48.3						61.1
Corporate			—						—						(17.0)						(13.3)
Eliminations			(0.1)						(0.7)						—						—
Consolidated Total			$	515.1					$	498.5					$	31.3					$	47.8
			Six Months Ended June 30,
			Revenues												Operating Profit (Loss)
			2021						2020						2021						2020
			(in millions)
Aggregates and specialty materials			$	316.8					$	264.2
Other			40.9						33.4
Construction Products			357.7						297.6						$	33.7					$	41.1
Utility, wind, and related structures			355.6						353.3
Storage tanks			93.9						92.7
Engineered Structures			449.5						446.0						46.6						45.8
Inland barges			106.9						196.0
Steel components			41.5						49.2
Transportation Products			148.4						245.2						5.4						30.2
Segment Totals before Eliminations and Corporate			955.6						988.8						85.7						117.1
Corporate			—						—						(31.5)						(24.2)
Eliminations			(0.1)						(2.1)						—						—
Consolidated Total			$	955.5					$	986.7					$	54.2					$	92.9

			June 30, 2021						December 31, 2020
			(in millions)
Land			$	143.3					$	139.2
Mineral reserves			483.2						249.9
Buildings and improvements			315.9						302.3
Machinery and other			945.5						853.6
Construction in progress			47.7						49.6
			1,935.6						1,594.6
Less accumulated depreciation and depletion			(728.9)						(681.3)
			$	1,206.7					$	913.3

Goodwill by segment is as follows:

			June 30, 2021						December 31, 2020
			(in millions)
Construction Products			$	331.6					$	320.0
Engineered Structures			437.6						437.0
Transportation Products			37.0						37.0
			$	806.2					$	794.0

The increase in Construction Products goodwill during the six months ended June 30, 2021 is primarily due to the acquisition of StonePoint. The increase in Engineered Structures goodwill during the six months ended June 30, 2021 is due to a refinement of the purchase price allocation of a recent acquisition. See Note 2 Acquisitions and Divestitures.

Intangibles, net consisted of the following:

												June 30, 2021						December 31, 2020
												(in millions)
Intangibles with indefinite lives - Trademarks												$	34.1					$	34.1
Intangibles with definite lives:
Customer relationships												133.2						123.8
Permits												87.5						73.6
Other												8.0						8.1
												228.7						205.5
Less accumulated amortization												(35.5)						(26.7)
												193.2						178.8
Intangible assets, net												$	227.3					$	212.9

			June 30, 2021						December 31, 2020
			(in millions)
Revolving credit facility			$	100.0					$	100.0
Term loan			148.1						149.1
Senior notes			400.0						—
Finance leases			12.4						5.6
			660.5						254.7
Less: unamortized debt issuance costs			(6.6)						(0.2)
Total debt			$	653.9					$	254.5

Revolving Credit Facility and Term Loan

On November 1, 2018, the Company entered into a $400.0 million unsecured revolving credit facility that was scheduled to mature in November 2023. On January 2, 2020, the Company entered into an Amended and Restated Credit Agreement to increase the revolving credit facility to $500.0 million and add a term loan facility of $150.0 million, in each case with a maturity date of January 2, 2025. The entire term loan was advanced on January 2, 2020 in connection with the closing of the acquisition of Cherry. See Note 2 Acquisitions and Divestitures. As of June 30, 2021, the term loan had a remaining balance of $148.1 million.

As of June 30, 2021, we had $100.0 million of outstanding loans borrowed under the revolving credit facility, and there were approximately $28.5 million of letters of credit issued, leaving $371.5 million available. Of the outstanding letters of credit as of June 30, 2021, $23.6 million are expected to expire in 2021, with the remainder in 2022. The majority of our letters of credit obligations support the Company’s various insurance programs and generally renew by their terms each year. On August 4, 2021, we borrowed an additional $100.0 million under our revolving credit facility to fund the acquisition of Southwest Rock.

The interest rates under the revolving credit facility and term loan are variable based on LIBOR or an alternate base rate plus a margin. 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 the Company’s leverage as measured by a consolidated total indebtedness to consolidated EBITDA ratio. The margin for borrowing ranges from 1.25% to 2.00% and was set at LIBOR plus 1.25% as of June 30, 2021. The commitment fee rate ranges from 0.20% to 0.35% and was set at 0.20% at June 30, 2021. 

The Company's revolving credit and term loan facilities require the maintenance of certain ratios related to leverage and interest coverage. As of June 30, 2021, we were in compliance with all such financial covenants. Borrowings under the credit agreement are guaranteed by certain wholly-owned subsidiaries of the Company.

In order to increase liquidity in anticipation of the acquisition of StonePoint, the Company entered into an unsecured 364-Day Credit Agreement on March 26, 2021 providing for a revolving line of credit of $150.0 million, with an outside maturity date of March 25, 2022. Pricing, covenants, and guarantees were substantially similar to the Company’s existing revolving credit and term loan facilities. Per the terms of the facility, it terminated on April 6, 2021 upon the closing of the Company’s private offering of $400.0 million in senior notes.

The carrying value of borrowings under our revolving credit and term loan facilities approximate fair value because the interest rate adjusts to the market interest rate (Level 3 input). See Note 3 Fair Value Accounting.

As of June 30, 2021, the Company had $1.5 million of unamortized debt issuance costs related to the revolving credit facility, which are included in other assets on the Consolidated Balance Sheet.

Senior Notes

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 commencing October 2021. 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 and term loan facilities. The terms of the indenture governing the 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 the indenture also limit the ability of the Company’s non-guarantor subsidiaries to incur certain types of debt.

At any time prior to April 15, 2024, the Company may redeem all or a portion of the Notes at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus an applicable make-whole premium and accrued and unpaid interest to the redemption date. On and after April 15, 2024, the Company may redeem all or a portion of the Notes at redemption prices set forth in the indenture, plus accrued and unpaid interest to the redemption date. If a Change of Control Triggering Event (as defined in the indenture) occurs, the Company must offer to repurchase the Notes at a price equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest to the date of repurchase.

The estimated fair value of the Notes as of June 30, 2021 was $407.3 million based on a quoted market price in a market with little activity (Level 2 input).

In connection with the issuance of the Notes, the Company paid $6.6 million of debt issuance costs.

The remaining principal payments under existing debt agreements as of June 30, 2021 are as follows:

			2021						2022						2023						2024						2025						Thereafter
			(in millions)
Revolving credit facility			$	—					$	—					$	—					$	—					$	100.0					$	—
Term loan			3.7						7.5						8.5						8.4						120.0						—
Senior notes			—						—						—						—						—						400.0

Interest rate hedges

We have various leases primarily for office space and certain equipment. At inception, we determine if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. For leases that contain options to purchase, terminate, or extend, such options are included in the lease term when it is reasonably certain that the option will be exercised. Some of our lease arrangements contain lease components and non-lease components which are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components for all leases.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available at commencement date in determining the present value of lease payments.

The following tables present information about the Company's operating leases as of June 30, 2021:

			June 30, 2021
			(in millions)
Maturity of Lease Liabilities
2021 (remaining)			$	3.1
2022			4.8
2023			3.6
2024			3.1
2025			2.4
Thereafter			10.7
Total undiscounted operating lease payments			27.7
Less imputed interest			(5.3)
Present value of operating lease liabilities			$	22.4

Balance Sheet Classification			June 30, 2021						December 31, 2020
			(in millions)
Other assets			$	19.3					$	17.9
Accrued liabilities			4.7						4.8
Other liabilities			17.7						16.4
Total operating lease liabilities			$	22.4					$	21.2

Finance Leases

Finance leases are included in property, plant, and equipment, net and debt on the Consolidated Balance Sheets. The associated amortization expense and interest expense are included in depreciation and interest expense, respectively, on the Consolidated Statements of Operations. These leases are not material to the Consolidated Financial Statements as of June 30, 2021.

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

			Three Months Ended June 30,												Six Months Ended June 30,
			2021						2020						2021						2020
			(in millions)
Interest income			$	(0.1)					$	(0.1)					$	(0.1)					$	(0.3)
Foreign currency exchange transactions			(0.1)						0.2						0.5						0.2
Other			(0.1)						(0.2)						(0.2)						(0.2)
Other, net (income) expense			$	(0.3)					$	(0.1)					$	0.2					$	(0.3)

For interim income tax reporting, we estimate our annual effective tax rate and apply it to our year to date ordinary income (loss). Tax jurisdictions with a projected or year to date loss for which a tax benefit cannot be realized are excluded. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur. We have open tax years from 2013 to 2020 with various significant tax jurisdictions.

Our effective tax rates of 16.8% and 19.0% for the three and six months ended June 30, 2021, respectively, were lower than the U.S. federal statutory rate of 21.0% due to decreased state income taxes, statutory depletion deductions, and compensation-related items, partially offset by disallowed expenses connected to acquisitions, and foreign nondeductible expenses. For the three and six months ended June 30, 2020, the effective tax rates of 26.2% and 25.5%, respectively, were higher than the U.S. federal statutory rate of 21.0% due primarily to state taxes, tax effects of foreign currency translation, and nondeductible compensation expenses in the U.S. and Mexico.

			Three Months Ended June 30,												Six Months Ended June 30,
			2021						2020						2021						2020
			(in millions)
Defined contribution plans			$	2.6					$	2.7					$	5.3					$	5.3
Multiemployer plan			0.6						0.5						1.0						0.9
			$	3.2					$	3.2					$	6.3					$	6.2

The Company contributes to a multiemployer defined benefit plan under the terms of a collective-bargaining agreement that covers certain union-represented employees at one of the facilities of Meyer Utility Structures, a subsidiary of Arcosa. The Company contributed $0.5 million and $0.9 million to the multiemployer plan for the three and six months ended June 30, 2021, respectively. The Company contributed $0.4 million and $0.8 million to the multiemployer plan for the three and six months ended June 30, 2020, respectively. Total contributions to the multiemployer plan for 2021 are expected to be approximately $1.7 million.

Changes in accumulated other comprehensive loss for the six months ended June 30, 2021 and 2020 are as follows:

						Currency translation adjustments						Unrealized loss on derivative financial instruments						Accumulated other comprehensive loss
						(in millions)
Balances at December 31, 2019						$	(16.3)					$	(3.4)					$	(19.7)
Other comprehensive income (loss), net of tax, before reclassifications						(0.7)						(3.9)						(4.6)
Amounts reclassified from accumulated other comprehensive loss, net of tax expense (benefit) of $0.0, ($0.2), and ($0.2)						—						0.6						0.6
Other comprehensive income (loss)						(0.7)						(3.3)						(4.0)
Balances at June 30, 2020						$	(17.0)					$	(6.7)					$	(23.7)
Balances at December 31, 2020						$	(16.6)					$	(5.5)					$	(22.1)
Other comprehensive income (loss), net of tax, before reclassifications						0.3						0.8						1.1
Amounts reclassified from accumulated other comprehensive loss, net of tax expense (benefit) of $0.0, ($0.2), and ($0.2)						—						0.7						0.7
Other comprehensive income (loss)						0.3						1.5						1.8
Balances at June 30, 2021						$	(16.3)					$	(4.0)					$	(20.3)

Stock-based compensation totaled approximately $4.1 million and $8.8 million for the three and six months ended June 30, 2021, respectively. Stock-based compensation totaled approximately $5.1 million and $8.8 million for the three and six months ended June 30, 2020, respectively.

Basic earnings per common share is computed by dividing net income remaining after allocation to unvested restricted shares, which includes unvested restricted shares of Arcosa stock held by employees of the Former Parent, by the weighted average number of basic common shares outstanding for the period. Except when the effect would be antidilutive, the calculation of diluted earnings per common share includes the weighted average net impact of nonparticipating unvested restricted shares. Total weighted average restricted shares were 1.8 million and 1.9 million shares for the three and six months ended June 30, 2021, respectively. Total weighted average restricted shares were 1.6 million shares for the three and six months ended June 30, 2020.

The computation of basic and diluted earnings per share follows.

    

			Three Months Ended June 30, 2021																		Three Months Ended June 30, 2020
			Income (Loss)						Average Shares						EPS						Income (Loss)						Average Shares						EPS
			(in millions, except per share amounts)
Net income			$	20.8																	$	33.3
Unvested restricted share participation			(0.1)																		(0.3)
Net income per common share – basic			20.7						48.1						$	0.43					33.0						47.9						$	0.69
Effect of dilutive securities:
Nonparticipating unvested restricted shares			—						0.5												—						0.5
Net income per common share – diluted			$	20.7					48.6						$	0.43					$	33.0					48.4						$	0.68
			Six Months Ended June 30, 2021																		Six Months Ended June 30, 2020
			Income (Loss)						Average Shares						EPS						Income (Loss)						Average Shares						EPS
			(in millions, except per share amounts)
Net income			$	36.7																	$	64.9
Unvested restricted share participation			(0.2)																		(0.5)
Net income per common share – basic			36.5						48.0						$	0.76					64.4						47.9						$	1.34
Effect of dilutive securities:
Nonparticipating unvested restricted shares			—						0.5												—						0.5
Net income per common share – diluted			$	36.5					48.5						$	0.75					$	64.4					48.4						$	1.33