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Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

•Basis of Historical Presentation

•Potential Impact of COVID-19 On Our Business

•Executive Overview

•Results of Operations

•Liquidity and Capital Resources

•Contractual Obligations and Commercial Commitments

•Critical Accounting Policies and Estimates

•Recent Accounting Pronouncements

•Forward-Looking Statements

Our MD&A should be read in conjunction with our Consolidated and Combined Financial Statements and related Notes in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.

Company Overview

Arcosa, Inc. and its consolidated subsidiaries, (“Arcosa,” “Company,” “we,” or “our”) headquartered in Dallas, Texas, is a provider of infrastructure-related products and solutions with leading brands serving construction, engineered structures, 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.

Basis of Historical Presentation

The accompanying Consolidated and Combined Financial Statements present our historical financial position, results of operations, comprehensive income/loss, and cash flows in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The combined financial statements for periods prior to the Separation were derived from Trinity’s consolidated financial statements and accounting records and prepared in accordance with GAAP for the preparation of carved-out combined financial statements. Through the date of the Separation, all revenues and costs as well as assets and liabilities directly associated with Arcosa have been included in the combined financial statements. Prior to the Separation, the combined financial statements also included allocations of certain selling, general, and administrative expenses provided by Trinity to Arcosa and allocations of related assets, liabilities, and the Former Parent’s net investment, as applicable. The allocations were determined on a reasonable basis; however, the amounts are not necessarily representative of the amounts that would have been reflected in the financial statements had the Company been an entity that operated independently of Trinity during the applicable periods. Related party allocations prior to the Separation, including the method for such allocation, are described further in Note 1, “Overview and Summary of Significant Accounting Policies” to the Consolidated and Combined Financial Statements.

Following the Separation, the consolidated financial statements include the accounts of Arcosa and those of our wholly-owned subsidiaries and no longer include any allocations from Trinity.

We have renamed our Engineered Structures segment, previously named Energy Equipment, as of December 31, 2020 to better reflect the products delivered. There have been no changes to the businesses that have historically comprised this segment.

Potential Impact of COVID-19 On Our Business

Our highest priority is the health and safety of our employees and communities. Our businesses support critical infrastructure sectors, pursuant to the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency standards. Our plants have continued to operate throughout the COVID-19 crisis. However, as of the date of this filing, uncertainty exists concerning the potential magnitude of the impact and duration of the COVID-19 pandemic. The following possible events related to the COVID-19 pandemic may potentially adversely impact our business, liquidity and financial condition, or results of operations: customer demand for our products and services may decrease; reductions in our customers' capex spending; our supply chain may have disruption preventing us from obtaining the necessary materials and equipment to manufacture our

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products and provide services; our employees’ ability to continue to work may be impacted because of COVID-19 related illness or local, state, or federal orders requiring them to stay at home; the effect of governmental regulations imposed in response to the COVID-19 pandemic may result in shutdowns of our operations; limitations on the ability of our customers to conduct their business and purchase our products and services; disruptions to our customers’ supply chains or purchasing patterns; and limitations on the ability of our customers to pay us on a timely basis.

We believe that, based on the various standards published to date, our employees are part of the Essential Critical Infrastructure Workforce, and the work they perform is critical, essential, and life-sustaining. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, suppliers and shareholders.

In addition to the extensive health and safety protocols already in place across our plants, we estimate that we incurred $4.0-5.0 million of incremental costs related to COVID-19 during the year ended December 31, 2020 for personal protective equipment, health screenings, deep cleaning services, and facilities re-configurations. We do not anticipate that the enhanced health and safety protocols will have a material impact on the productivity of our plants.

The preparation of the Company's Consolidated and Combined Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. At this time, we have not observed any material impairments of our assets or a significant change in the fair value of assets due to the COVID-19 pandemic. However, due to the factors discussed above, we are unable to determine or predict the overall impact the COVID-19 pandemic will have on our business, results of operations, liquidity or capital resources.

Market Outlook

•Within our Construction Products segment, we have experienced better than anticipated construction demand since the outbreak of the COVID-19 pandemic in March as construction activity in Texas has remained resilient and other states have reopened for business. However, we did experience a softening of demand for our specialty materials and shoring products businesses following the outbreak that has recently shown signs of improvement but remains below pre-pandemic levels. The outlook for public and private construction activity has improved as expectations for U.S. economic growth have increased following the roll-out of vaccines and associated re-opening of the economy, but the environment continues to be uncertain.Our Construction Products segment has the largest exposure to Texas, where construction demand is expected to be more favorable than national averages.

•Within our Engineered Structures segment, our backlog as of December 31, 2020 provides a healthy level of production visibility for 2021, but at a lower level than at the beginning of 2020. Our customers remain committed to taking delivery of these orders. In utility structures, order and inquiry activity continues to be strong, as customers remain focused on grid hardening and reliability initiatives. We continue to actively work with our wind tower customers on new order inquiries; however, we expect a lower level of wind tower production in 2021 as the wind industry continues to transition from 100% PTC support. In 2021, we will benefit from a full-year of revenues from the newly acquired traffic and telecom structures businesses, where demand conditions are very favorable. Order and inquiry activity in the storage tank business has improved since the onset of COVID-19 after taking a pause initially, as certain customers deferred new tank installations.

•Within our Transportation Products segment, our backlog for inland barges as of December 31, 2020 provides a base level of production visibility for 2021, but at a significantly lower level than we had at the beginning of 2020. Our customers remain committed to taking delivery of these orders. Barge order levels fell sharply in the second and third quarters of 2020, as barge utilization declined from the COVID-19 related economic slowdown. Lower demand for refined products, including gasoline and jet fuel, and low, but increasing, oil prices negatively impacted order quantities for liquid barges in 2020 and inquiries remain very low thus far in 2021. On a more positive note, the underlying fundamentals for a dry barge replacement cycle remain in place, and we received a higher level of orders in the fourth quarter, consistent with pre-pandemic demand. However, a sharp acceleration in steel prices occurring at the end of 2020 has negatively impacted the near-term outlook for hopper demand. We have reduced our capacity in all three barge operating plants to align with lower production levels in 2021, while remaining flexible to allow time for fundamentals to recover. We are evaluating additional cost reduction alternatives and if demand does not improve in the near term, we will take additional actions to reduce our cost structure. Demand for steel components continues to decline as the outlook for the North American rail transportation market, which was softening pre-COVID-19, remains uncertain.

The February 2021 winter storm in Texas and the broader Southern United States will impact our Q1 performance, as we lost more than one week of production across a significant part of our operating footprint. As of the date of this release, we have restored operations in most of our facilities but may experience continuing impacts in our supply chain, particularly for steel mill production that was impacted by the storm.

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Executive Overview

Financial Operations and Highlights

•Revenues for the year ended December 31, 2020 increased 11.4% to $1.9 billion compared to the year ended December 31, 2019 primarily due to the impact of the Cherry acquisition in our Construction Products segment, higher unit volumes in our Engineered Structures segment, and increased hopper barge deliveries in our Transportation Products segment.

•Operating profit for year ended December 31, 2020 of $151.8 million was flat compared to the year ended December 31, 2019 as increased operating profit in the Construction Product and Transportation Products segments were offset by increased costs in the Engineered Structures segment and corporate.

•Selling, general, and administrative expenses increased by 24.3% for the year ended December 31, 2020, when compared to the prior year largely due to additional costs from the acquired Cherry business and other current year acquisitions, as well as increased corporate costs.

•The effective tax rate for the year ended December 31, 2020 was 22.9% compared to 22.8% for the year ended December 31, 2019. See Note 10, “Income Taxes” to the Consolidated and Combined Financial Statements.

•Net income for the year ended December 31, 2020 was $106.6 million compared with $113.3 million for the year ended December 31, 2019.

Unsatisfied Performance Obligations (Backlog)

As of December 31, 2020 and 2019 our backlog of firm orders was as follows:

(in millions)

Engineered Structures:

Utility, wind, and related structures $ 334.0 $ 596.8

Transportation Products:

Substantially all unsatisfied performance obligations in our Engineered Structures segment are expected to be delivered during 2021 with approximately 6.0% of the unsatisfied performance obligations for storage tanks expected to be delivered during 2022. All of the unsatisfied performance obligations for barges in our Transportation Products segment are expected to be delivered during 2021.

Results of Operations

The following discussion of Arcosa’s results of operations should be read in connection with “Forward-Looking Statements” and Item 1A, “Risk Factors”. These items provide additional relevant information regarding the business of Arcosa, its strategy and various industry conditions which have a direct and significant impact on Arcosa’s results of operations, as well as the risks associated with Arcosa’s business.

Overall Summary

Revenues

Year Ended December 31, Percent Change

($ in millions)

2020 versus 2019

•Revenues increased by 11.4% with all segments contributing to the increase.

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•Revenues from our Construction Products segment increased primarily due to the impact of the Cherry acquisition.

•In our Engineered Structures segment, revenues increased primarily driven by higher volumes in utility structures and sales from our acquired traffic and telecom structures businesses.

•Revenues from our Transportation Products segment increased primarily due to higher hopper barge deliveries partially offset by lower tank barge deliveries and decreased deliveries and lower contractual pricing for steel components.

2019 versus 2018

•Revenues increased by 18.9% with all segments contributing to the increase.

•Revenues from our Construction Products segment increased primarily due to the impact of the ACG acquisition.

•In our Engineered Structures segment, revenues increased primarily driven by higher volumes in wind towers and higher pricing levels in utility structures.

•Revenues from our Transportation Products segment increased primarily due to higher tank barge volumes partially offset by lower contractual pricing and decreased volumes in steel components.

Operating Costs

Operating costs are comprised of cost of revenues; selling, general, and administrative expenses; impairment charges; and gains or losses on property disposals.

Year Ended December 31, Percent Change

(in millions)

All Other — — 0.1

2020 versus 2019

•Operating costs increased 12.6%.

•The increase in our Construction Products segment was primarily due to higher volumes from the acquired Cherry business.

•Operating costs for the Engineered Structures segment increased primarily due higher volumes in utility structures and sales from our acquired traffic and telecom structures businesses.

•Operating costs for the Transportation Products segment decreased primarily due to improved operating efficiencies in our barge business.

•Total selling, general, and administrative expenses increased 24.3% largely due to additional costs from the acquired Cherry business and other current year acquisitions, as well as increased corporate costs. As a percentage of revenue, selling, general, and administrative expenses for the year ended December 31, 2020 was 11.5% compared to 10.3% for the year ended December 31, 2019.

2019 versus 2018

•Operating costs increased 16.0%.

•The increase in our Construction Products segment was primarily due to the acquired ACG business as well as increased volumes in our legacy businesses.

•Operating costs for the Engineered Structures segment decreased primarily due to an impairment charge and the elimination of operating losses from divested businesses in 2018, partially offset by higher volumes in 2019.

•Operating costs for the Transportation Products segment increased due to higher tank barge volumes and start-up costs incurred related to the re-opening of a previously idled barge facility, partially offset by lower steel component volumes.

•Total selling, general, and administrative expenses increased 16.6% largely due to additional costs from the acquired ACG business, incremental standalone costs related to the replacement of services and fees previously provided or incurred by Trinity, and other standalone public company costs. As a percentage of revenue, selling, general, and administrative expenses for the year ended December 31, 2019 was 10.3% compared to 10.5% for the year ended December 31, 2018.

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Operating Profit (Loss)

Year Ended December 31, Percent Change

(in millions)

All Other — — (0.1)

Eliminations — — (0.3)

2020 versus 2019

•Operating profit was flat year over year.

•Operating profit in the Construction Products segment increased primarily due to the impact of the acquired Cherry business.

•Operating profit in our Engineered Structures segment decreased due to the temporary idling of a wind tower facility and operational challenges in our utility structures business related to COVID-19.

•Operating profit in our Transportation Products segment increased primarily due to higher hopper barge deliveries and improved operating efficiencies in our barge business.

2019 versus 2018

•Our operating profit increased 61.1%.

•Operating profit in the Construction Products segment increased 4.6% primarily due to higher volumes from the acquired ACG business.

•Operating profit in our Engineered Structures segment increased significantly due to higher unit volumes in wind towers and higher pricing levels in utility structures as well as the elimination of operating losses from, and the incurrence of an impairment charge related to, businesses divested in 2018.

•Operating profit in our Transportation Products segment decreased 3.3% primarily due to reduced volumes and lower contractual pricing for steel components as well as start-up costs incurred toward the re-opening of a previously idled barge facility, partially offset by higher tank barge volumes.

For a 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:

Year Ended December 31,

(in millions)

Interest income $ (0.4) $ (1.4) $ (0.4)

Foreign currency exchange transactions 3.6 1.5 (0.2)

Other, net (income) expense $ 3.0 $ (0.7) $ (1.0)

2020 versus 2019

•Other, net expense due to foreign currency exchange transactions increased by $2.1 million primarily driven by the volatility in the U.S. dollar to Mexican peso exchange rate throughout 2020. This incremental expense resulted in a foreign income tax benefit, which had a favorable impact on our effective tax rate for the year ended December 31, 2020.

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Income Taxes

The income tax provision for the years ended December 31, 2020, 2019, and 2018 was $31.6 million, $33.5 million, and $19.3 million, respectively. The effective tax rate for the years ended December 31, 2020, 2019, and 2018 was 22.9%, 22.8%, and 20.3%, respectively. The effective tax rates differ from the federal tax rate of 21.0% due to the impact of state income taxes, excess tax benefits related to equity compensation, and the impact of foreign tax benefits.

In response to the COVID-19 pandemic, on March 27, 2020 the U.S. Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which includes certain tax relief and benefits that may impact the Company. Approximately $15 million of federal and state income tax payments deferred during the first half of the year were paid during the third quarter of 2020. As of December 31, 2020, the Company has deferred $9.7 million in payroll-related taxes in accordance with the provisions of the CARES Act. We expect to pay $4.9 million during the year ending December 31, 2021, with the remainder to be paid during 2022.

See Note 10 of the Notes to Consolidated and Combined Financial Statements for a further discussion of income taxes.

Segment Discussion

Construction Products

Year Ended December 31, Percent Change

($ in millions)

Revenues:

Operating costs:

Impairment charge 0.8 — —

2020 versus 2019

•Revenues increased 35.0%, driven by the acquisition of Cherry, which increased segment revenues by approximately 40%. This was partially offset by a decrease of 14.4% in revenues in our trench shoring business as a result of lower volumes as customers reduced capital expenditures during the COVID-19 crisis. In our legacy aggregates and specialty materials businesses, revenues were mostly flat as reduced volumes in plants serving oil and gas markets and from COVID-19 related construction delays were mostly offset by increased aggregates volumes serving other markets.

•Cost of revenues increased 31.4%, primarily due to higher volumes from the acquired Cherry business. As a percent of revenues, cost of revenues decreased to 75.8% compared to 77.8%.

•Selling, general, and administrative expenses increased 52.7% primarily due to additional costs from the acquired Cherry business. Selling, general, and administrative costs in the legacy businesses were lower than the previous period.

•Operating profit increased by 41.7%, outpacing the increase in revenues.

•Depreciation, depletion, and amortization expense increased primarily due to the acquired Cherry business.

2019 versus 2018

•Revenues increased 50.4%, driven by the acquisition of ACG Materials (“ACG”), which increased revenues by approximately 50%. In our legacy aggregates and specialty materials businesses, increased volumes were substantially offset by lower average selling prices, largely in our natural aggregates business in the Dallas-Fort Worth, Texas market area.

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•Cost of revenues increased 61.0%, primarily due to the acquired ACG business as well as increased volumes in our legacy aggregates and specialty materials businesses.

•Selling, general, and administrative expenses increased 52.9% primarily due to additional costs from the acquired ACG business.

•Operating profit increased primarily due to the acquired ACG business. Operating margin decreased reflecting the change in product mix as a result of the addition of the ACG business, which has lower margins than the segment, as well as lower average selling prices in the legacy natural aggregates business.

•Depreciation, depletion, and amortization expense increased primarily due to the acquired ACG business.

Engineered Structures

Year Ended December 31, Percent Change

($ in millions)

Revenues:

Operating costs:

Selling, general, and administrative expenses 74.4 65.3 70.0 13.9 (6.7)

Impairment charge 1.3 — 23.2

2020 versus 2019

•Revenues increased 4.9% driven primarily by higher volumes in utility structures and sales from our acquired traffic and telecom structures businesses, partially offset by lower steel prices in utility structures and reduced volumes and pricing in our wind towers and storage tank businesses. The lower volumes in our wind towers business was partially due to a temporary idling of one of our facilities in the fourth quarter to invest in a planned product changeover.

•Cost of revenues increased 7.6% driven by the acquired traffic and telecom structures businesses, higher volumes in utility structures, product changeover costs in wind towers, and operational challenges in our utility structures business primarily related to COVID-19. This increase was partially offset by lower volumes in our storage tank business.

•Selling, general, and administrative expenses increased 13.9% primarily due to additional costs from acquired businesses.

•Operating profit decreased by 20.4% primarily due to the temporary idling of a wind tower facility and operational challenges in our utility structures business related to COVID-19.

2019 versus 2018

•Revenues increased 7.2%, driven primarily by higher unit volumes in wind towers and higher pricing levels in utility structures. Revenues from other product lines also increased due to higher volumes and pricing levels, partially offset by the elimination of revenues from businesses divested in 2018.

•Cost of revenues increased 1.9%, due primarily to higher overall volumes. The increase was partially offset by the elimination of costs from divested businesses, as well as a $6.1 million finished goods inventory write-off recognized in 2018 related to an order for a single customer in our utility structures business.

•Selling, general, and administrative expenses decreased 6.7% primarily due to the elimination of costs from divested businesses and a $2.9 million recovery of bad debt related to a single customer in our utility structures business.

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Unsatisfied Performance Obligations (Backlog)

As of December 31, 2020, the backlog for utility, wind, and related structures was $334.0 million compared to $596.8 million as of December 31, 2019. Substantially all of our utility, wind, and related structures backlog is expected to be delivered during the year ending December 31, 2021. Future wind tower orders are subject to uncertainty as PTC eligibility for new wind farm projects is currently in a phase-out period that extends until 2025. Pricing of orders and individual order quantities reflect a market transitioning from PTC incentives. As of December 31, 2020, the backlog for our storage tanks in our Engineered Structures segment was $15.6 million, 94.0% of which is expected to be delivered during the year ending December 31, 2021.

Transportation Products

Year Ended December 31, Percent Change

($ in millions)

Revenues:

Operating costs:

Selling, general, and administrative expenses 22.6 22.1 22.5 2.3 (1.8)

Impairment charge 5.0 — —

2020 versus 2019

•Revenues were substantially unchanged as higher barge revenues, driven by increased hopper deliveries, were offset by lower steel components revenues due to decreased deliveries and lower contractual pricing.

•Cost of revenues decreased by 3.2%, primarily due to lower steel component volumes and the elimination of $4.0 million of start-up costs incurred in the prior year related to the re-opening of a previously idled barge manufacturing plant. This was partially offset by higher hopper barge volumes. As a percentage of revenues, cost of revenues decreased to 82.4% compared to 85.2% in the prior year period primarily due to improved operating efficiencies in our barge business.

•Selling, general, and administrative expenses were substantially unchanged.

•The segment was negatively impacted by a $5.0 million non-cash impairment charge primarily related to unusable non-operating assets that were scrapped from a barge business acquired in 2018.

•Operating profit increased by 16.7%, outpacing the increase in revenues.

2019 versus 2018

•Revenues increased 19.0%, primarily driven by higher tank barge volumes but partially offset by lower contractual pricing and decreased volumes in steel components.

•Cost of revenues increased 23.8%, driven by higher tank barge volumes, partially offset by lower steel component volumes. Cost of revenues also increased $2.6 million due to start-up costs related to the re-opening of a previously idled barge manufacturing facility, which began delivering barges in the third quarter of 2019.

•Selling, general, and administrative expenses were substantially unchanged.

Unsatisfied Performance Obligations (Backlog)

As of December 31, 2020, the backlog for inland barges was $175.5 million compared to $346.9 million as of December 31, 2019. All of the backlog for inland barges is expected to be delivered during the year ending December 31, 2021.

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Corporate

Year Ended December 31, Percent Change

($ in millions)

2020 versus 2019

•Corporate overhead costs increased 22.0% primarily due to higher acquisition-related transaction and integration costs of $4.6 million as well as a non-recurring increase in legal expenses of $2.5 million incurred during the third quarter of 2020.

2019 versus 2018

•Corporate overhead costs increased 47.4% primarily due to incremental standalone costs related to the replacement of services and fees previously provided or incurred by Trinity as well as other standalone public company costs.

•Corporate overhead costs prior to the Separation consist of costs not previously allocated to Trinity’s business units and have been allocated to Arcosa based on an analysis of each cost function and the relative benefits received by Arcosa for each of the periods using methods management believes are consistent and reasonable. See Note 1 of the Notes to Consolidated and Combined Financial Statements for further information.

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 each of the last three years:

Year Ended December 31,

(in millions)

Total cash provided by (required by):

Net increase (decrease) in cash and cash equivalents $ (144.6) $ 141.0 $ 92.6

2020 versus 2019

Operating Activities. Net cash provided by operating activities for the year ended December 31, 2020 was $259.9 million compared to $358.8 million for the year ended December 31, 2019.

•The changes in current assets and liabilities resulted in a net source of cash of $3.8 million for the year ended December 31, 2020 compared to a net source of cash of $132.6 million for the year ended December 31, 2019. The decrease was primarily driven by increased receivables in the current year compared to decreased receivables in the prior year.

Investing Activities. Net cash required by investing activities for the year ended December 31, 2020 was $528.2 million compared to $109.4 million for the year ended December 31, 2019.

•Capital expenditures for the year ended December 31, 2020 were $82.1 million compared to $85.4 million for the year ended December 31, 2019.

•Proceeds from the sale of property, plant, and equipment and other assets totaled $9.6 million for the year ended December 31, 2020 compared to $8.9 million for the year ended December 31, 2019.

•Cash paid for acquisitions, net of cash acquired, was $455.7 million for the year ended December 31, 2020 compared to $32.9 million for the year ended December 31, 2019.

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Financing Activities. Net cash provided by financing activities for the year ended December 31, 2020 was $123.7 million compared to $108.4 million of net cash required by financing activities for the same period in 2019.

•During the year ended December 31, 2020, the Company received proceeds from the issuance of the $150 million term loan, as well as from the precautionary advance under the Company's revolving credit facility of $100 million that was borrowed and repaid during the year. During the year ended December 31, 2019, the Company had repayments of advances under the Company's revolving credit facility of $80 million.

•Dividends paid during the year ended December 31, 2020 were $9.8 million.

•The Company paid $8.0 million during the year ended December 31, 2020 to repurchase common stock under the share repurchase program in effect at the time compared to $11.0 million paid during the year ended December 31, 2019.

2019 versus 2018

Operating Activities. Net cash provided by operating activities for the year ended December 31, 2019 was $358.8 million compared to $118.5 million for the year ended December 31, 2018.

•The increase in cash flow provided by operating activities was primarily driven by increased earnings for the year ended December 31, 2019 and changes in current assets and liabilities.

•The changes in current assets and liabilities resulted in a net source of cash of $132.6 million for the year ended December 31, 2019 compared to a net use of cash of $80.8 million for the year ended December 31, 2018. The increase was primarily driven by a reduction in receivables and increase in advance billings for our Engineered Structures and Transportation Products segments.

Investing Activities. Net cash required by investing activities for the year ended December 31, 2019 was $109.4 million compared to $364.5 million for the year ended December 31, 2018.

•Capital expenditures for the year ended December 31, 2019 were $85.4 million compared to $44.8 million for the year ended December 31, 2018.

•Proceeds from the sale of property, plant, and equipment and other assets totaled $8.9 million for the year ended December 31, 2019 compared to $10.2 million for the year ended December 31, 2018.

•Cash paid for acquisitions, net of cash acquired, was $32.9 million for the year ended December 31, 2019 compared to $333.2 million during for the year ended December 31, 2018.

Financing Activities. Net cash required by financing activities during the year ended December 31, 2019 was $108.4 million compared to $338.6 million of net cash provided by financing activities for the same period in 2018.

•During the year ended December 31, 2019, the Company had repayments of advances under the Company's revolving credit facility of $80 million. During the year ended December 31, 2018, the Company had borrowings under the revolving credit facility of $180 million.

•Dividends paid during the year ended December 31, 2019 were $9.9 million.

•The Company paid $11.0 million during the year ended December 31, 2019 to repurchase common stock under the share repurchase program in effect at the time compared to $3.0 million paid during the year ended December 31, 2018.

Other Investing and Financing Activities

Revolving Credit Facility

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 from $400.0 million 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 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 Arcosa’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 December 31, 2020. The commitment fee rate ranges from 0.20% to 0.35% and was set at 0.20% at December 31, 2020.

In March 2020, as a precautionary measure, the Company borrowed $100.0 million under its revolving credit facility to increase our cash position and preserve financial flexibility considering the uncertainty resulting from the COVID-19 pandemic. The Company subsequently repaid the $100.0 million during the three months ended June 30, 2020. As of December 31, 2020, we had $100.0 million of outstanding loans borrowed under the facility and there were approximately $28.6 million in letters of credit issued, leaving $371.4 million available for borrowing.

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The entire term loan was advanced on January 2, 2020 in connection with the closing of the acquisition of Cherry.

The Company's revolving credit and term loan facilities require the maintenance of certain ratios related to leverage and interest coverage. As of December 31, 2020, we were in compliance with all such financial covenants. Borrowings under the credit agreement are guaranteed by certain wholly-owned subsidiaries of the Company.

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. The Company further believes that its financial resources will allow it to manage the anticipated impact of COVID-19 on the Company's business operations for the foreseeable future. The macroeconomic uncertainties posed by COVID-19 are evolving rapidly. Consequently, the Company will continue to evaluate its financial position in light of future developments, particularly those relating to COVID-19.

Repurchase Program

In December 2020, the Company’s Board of Directors authorized a new $50 million share repurchase program effective January 1, 2021 through December 31, 2022. The new program replaced the previous program which expired on December 31, 2020. Under the previous program, the Company repurchased 184,772 shares at a cost of $8.0 million during the year ended December 31, 2020. See Note 1 of the Notes to Consolidated and Combined Financial Statements.

Off-Balance Sheet Arrangements

As of December 31, 2020, we had letters of credit issued under our revolving credit facility in an aggregate principal amount of $28.6 million, of which $26.1 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. See Note 7 of the Notes to Consolidated and Combined Financial Statements.

Derivative Instruments

In December 2018, the Company entered into an interest rate swap instrument, effective as of January 2, 2019 and expiring in 2023, to reduce the effect of changes in the variable interest rates associated with borrowings under the revolving credit facility. The instrument carried an initial notional amount of $100.0 million, thereby hedging the first $100.0 million of borrowings under the credit facility. The instrument effectively fixes the LIBOR component of the credit facility borrowings at a monthly rate of 2.71%. As of December 31, 2020, the Company has recorded a liability of $7.3 million for the fair value of the instrument, all of which is recorded in accumulated other comprehensive loss. See Note 3 and Note 7 of the Notes to Consolidated and Combined Financial Statements.

Stock-Based Compensation

We have a stock-based compensation plan for our directors, officers, and employees. See Note 13 of the Notes to Consolidated and Combined Financial Statements.

Employee Retirement Plans

In 2020, we sponsored an employee savings plan under the 401(k) plan that covered substantially all employees and included a company matching contribution with the investment of the funds directed by the participants. The Company also contributed to a multiemployer defined benefit pension plan under the terms of a collective-bargaining agreement that covered certain union-represented employees at one of our facilities. See Note 11 of the Notes to Consolidated and Combined Financial Statements.

Contractual Obligations and Commercial Commitments

As of December 31, 2020, we had the following contractual obligations and commercial commitments:

Payments Due by Period

(in millions)

Obligations for purchase of goods and services 179.7 160.4 18.9 0.4 —

See Note 15 of the Notes to Consolidated and Combined Financial Statements.

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Critical Accounting Policies and Estimates

MD&A discusses our Consolidated and Combined Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

On an on-going basis, management evaluates its estimates and judgments based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our Consolidated and Combined Financial Statements.

Revenue Recognition

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.

Construction Products

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.

Engineered Structures

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. 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.

Transportation Products

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

Inventory

Inventories are valued at the lower of cost or net realizable value. Our policy related to excess and obsolete inventory requires an analysis of inventory at the business unit level on a quarterly basis and the recording of any required adjustments. In assessing the ultimate realization of inventories, we are required to make judgments as to future demand requirements and compare that with the current or committed inventory levels. It is possible that changes in required inventory reserves may occur in the future due to then current market conditions.

Long-lived Assets

We periodically evaluate the carrying value of long-lived assets to be held and used for potential impairment. The carrying value of long-lived assets to be held and used is considered impaired only when the carrying value is not recoverable through undiscounted future cash flows and the fair value of the assets is less than their carrying value. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risks involved or market quotes as available. Impairment losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced by the estimated cost to dispose of the assets.

Goodwill

Goodwill is required to be tested for impairment annually, or on an interim basis whenever events or circumstances change indicating that the carrying amount of the goodwill might be impaired. The quantitative goodwill impairment test is assessed at the “reporting unit” level by comparing the reporting unit's estimated fair value with the carrying amount of its net assets. If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized. The goodwill impairment is measured as the excess of the reporting unit's carrying value over its fair value, not to exceed the amount of goodwill allocated to the reporting unit. The estimates and judgments that most significantly affect the fair value calculations are assumptions,

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consisting of level three inputs, related to revenue and operating profit growth, discount rates, and exit multiples. Based on the Company's annual goodwill impairment test, performed at the reporting unit level as of December 31, 2020, the Company concluded that no impairment charges were determined to be necessary and that none of the reporting units evaluated were at risk of failing the goodwill impairment test. A reporting unit is considered to be at risk if its estimated fair value does not exceed the carrying value of its net assets by 10% or more. See Note 1 and Note 6 of the Notes to Consolidated and Combined Financial Statements.

Given the uncertainties of the economy and its potential impact on our businesses, there can be no assurance that our estimates and assumptions regarding the fair value of our reporting units, made for the purposes of the long-lived asset and goodwill impairment tests, will prove to be accurate predictions of the future. If our assumptions regarding forecasted cash flows are not achieved, it is possible that impairments of goodwill and long-lived assets may be required.

Warranties

The Company provides various express, limited product warranties that generally range from one to five years depending on the product. The warranty costs are estimated using a two-step approach. First, an engineering estimate is made for the cost of all claims that have been asserted by customers. Second, based on historical, accepted claims experience, a cost is accrued for all products still within a warranty period for which no claims have been filed. The Company provides for the estimated cost of product warranties at the time revenue is recognized related to products covered by warranties and assesses the adequacy of the resulting reserves on a quarterly basis.

Workers' Compensation

We are effectively self-insured for workers’ compensation claims. A third-party administrator processes all such claims. We accrue our workers’ compensation liability based upon independent actuarial studies. To the extent actuarial assumptions change and claims experience rates differ from historical rates, our liability may change.

Contingencies and Litigation

The Company is involved in claims and lawsuits incidental to our business. Based on information currently available with respect to such claims and lawsuits, including information on claims and lawsuits as to which the Company is aware but for which the Company has not been served with legal process, it is management’s opinion that the ultimate outcome of all such claims and litigation, including settlements, in the aggregate will not have a material adverse effect on the Company’s financial condition for purposes of financial reporting. However, resolution of certain claims or lawsuits by settlement or otherwise, could impact the operating results of the reporting period in which such resolution occurs.

Environmental

We are involved in various proceedings related to environmental matters. We have provided reserves to cover probable and estimable liabilities with respect to such proceedings, taking into account currently available information and our contractual recourse. However, estimates of future response costs are inherently imprecise. Accordingly, there can be no assurance that we will not become involved in future environmental litigation or other proceedings or, if we were found to be responsible or liable in any litigation or proceeding, that such costs would not be material to us.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and other tax attributes using currently enacted tax rates. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date. Management is required to estimate the timing of the recognition of deferred tax assets and liabilities, make assumptions about the future deductibility of deferred tax assets, and assess deferred tax liabilities based on enacted law and tax rates for the appropriate tax jurisdictions to determine the amount of such deferred tax assets and liabilities. Changes in the calculated deferred tax assets and liabilities may occur in certain circumstances including statutory income tax rate changes, statutory tax law changes, or changes in the structure or tax status of the Company. The Company assesses whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, both positive and negative, using a more likely than not standard. This assessment considers, among other matters, the nature, frequency, and severity of recent losses; a forecast of future profitability; the duration of statutory carryback and carryforward periods; the Company’s experience with tax attributes expiring unused; and tax planning alternatives.

At December 31, 2020, the Company had $20.8 million federal consolidated net operating loss carryforwards, primarily from businesses acquired, and $0.9 million of tax-effected state loss carryforwards remaining. In addition, the Company had $52.5 million of foreign net operating loss carryforwards that will begin to expire in the year 2022. We have established a valuation allowance for state and foreign tax operating losses and credits that we have estimated may not be realizable.

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At times, we may claim tax benefits that may be challenged by a tax authority. We recognize tax benefits only for tax positions more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in our tax returns that do not meet these recognition and measurement standards.

The Tax Cuts and Jobs Act (“the Act”) was enacted on December 22, 2017. The Act reduced the U.S. federal corporate income tax rate from 35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and created new taxes on certain foreign-sourced earnings. During the year ended December 31, 2018, we finalized the accounting for the enactment of the Act and recorded an additional $1.5 million benefit, primarily as a result of the true-up of our deferred taxes.

For periods prior to and including the Separation, income taxes as presented herein attribute current and deferred income taxes of the Company's standalone financial statements in a manner that is systematic, rational, and consistent with the asset and liability method prescribed by the Accounting Standards Codification Topic 740 — Income Taxes (“ASC 740”). Accordingly, Arcosa’s income tax provision has been prepared following the separate return method. The separate return method applies ASC 740 to the standalone financial statements of each member of the consolidated group as if the group member were a separate taxpayer and a standalone enterprise. As a result, actual tax transactions included in the consolidated financial statements of Trinity may not be included in the separate financial statements of Arcosa. Similarly, the tax treatment of certain items reflected in the separate financial statements of Arcosa may not be reflected in the consolidated financial statements and tax returns of Trinity; therefore, such items as net operating losses, credit carryforwards, and valuation allowances may exist in the standalone financial statements that may or may not exist in Trinity’s consolidated financial statements.

Recent Accounting Pronouncements

See Note 1 of the Notes to Consolidated and Combined Financial Statements for information about recent accounting pronouncements.

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Forward-Looking Statements

This annual report on Form 10-K (or statements otherwise made by the Company or on the Company’s behalf from time to time in other reports, filings with the Securities and Exchange Commission (“SEC”), news releases, conferences, internet postings or otherwise) 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,” 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 the COVID-19 pandemic on our sales, operations, supply chain, employees, and financial condition;

•market conditions and customer demand for our business products and services;

•the cyclical 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;

•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;

•interest rates and capital costs;

•counter-party risks for financial instruments;

•long-term funding of our operations;

•taxes;

•the stability of the governments and political and business conditions in certain foreign countries, particularly Mexico;

•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;

•the improper use of social and other digital media to disseminate false, misleading and/or unreliable or inaccurate information about the Company or demonstrate actions that negatively reflect on the Company;

•if the Company's ESG efforts are not favorably received by stockholders;

•if the Company does not realize some or all of the benefits expected to result from the Separation, or if such benefits are delayed;

•if the distribution of shares of Arcosa resulting from the Separation, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, the Company's stockholders at the time of the distribution and the Company could be subject to significant tax liability; and

•if the Separation does not comply with state fraudulent conveyance laws and legal dividend requirements.

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” included elsewhere herein.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Our earnings could be affected by changes in interest rates due to the impact those changes have on our variable rate revolving credit and term loan facility. As of December 31, 2020, we had $100.0 million of outstanding loans borrowed under the revolving credit facility. As our interest rate swap hedges the first $100 million of borrowings under the revolving credit facility, these borrowings are fully hedged against any increases in interest rates as of the end of the year. At December 31, 2019, borrowings under the revolving credit facility were fully hedged against any increases in interest rates. As of December 31, 2020, we had a remaining balance of $149.1 million on the term loan advanced in January 2020. If interest rates average one percentage point more in fiscal year 2021 than they did during 2020, our interest expense would increase by $1.5 million.

In addition, we are subject to market risk related to our net investments in our foreign subsidiaries. The net investment in foreign subsidiaries as of December 31, 2020 was $148.4 million. The impact of such market risk exposures as a result of foreign exchange rate fluctuations has not been significant to Arcosa. See Note 9 of the Consolidated and Combined Financial Statements.

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Item 8.Financial Statements and Supplementary Data.

Arcosa, Inc.

Index to Financial Statements

Page

Report of Independent Registered Public Accounting Firm 48

Consolidated Balance Sheets as of December 31, 2020 and 2019 53

Notes to Consolidated and Combined Financial Statements 56

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Arcosa, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Arcosa, Inc. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated and combined statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated and combined financial statements”). In our opinion, the consolidated and combined financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 25, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated and combined financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

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Valuation of Goodwill

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Accounting for acquisitions

/s/ ERNST & YOUNG LLP

We have served as the Company's auditor since 2015.

Dallas, Texas

February 25, 2021

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Arcosa, Inc. and Subsidiaries

Consolidated and Combined Statements of Operations

Year Ended December 31,

(in millions, except per share amounts)

Operating costs:

Selling, general, and administrative expenses 223.1 179.5 153.9

Impairment charge 7.1 — 23.2

Other, net (income) expense 3.0 (0.7) (1.0)

Provision (benefit) for income taxes:

Net income per common share:

Weighted average number of shares outstanding:

Dividends declared per common share $ 0.20 $ 0.20 $ 0.05

See accompanying Notes to Consolidated and Combined Financial Statements.

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Arcosa, Inc. and Subsidiaries

Consolidated and Combined Statements of Comprehensive Income

Year Ended December 31,

(in millions)

Other comprehensive income (loss):

Derivative financial instruments:

Currency translation adjustment:

See accompanying Notes to Consolidated and Combined Financial Statements.

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Arcosa, Inc. and Subsidiaries

Consolidated Balance Sheets

(in millions, except per share amounts)

ASSETS

Current assets:

Cash and cash equivalents $ 95.8 $ 240.4

Receivables, net of allowance for doubtful accounts of $3.4 and $2.3 260.2 200.0

Inventories:

Property, plant, and equipment, net 913.3 816.2

Deferred income taxes 15.4 14.3

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt 6.3 3.7

Stockholders’ equity:

Accumulated other comprehensive loss (22.1) (19.7)

See accompanying Notes to Consolidated and Combined Financial Statements.

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Arcosa, Inc. and Subsidiaries

Consolidated and Combined Statements of Cash Flows

Year Ended December 31,

(in millions)

Operating activities:

Depreciation, depletion, and amortization 114.5 85.8 67.6

Impairment charge 7.1 — 23.2

Stock-based compensation expense 20.0 14.6 9.9

Provision for deferred income taxes 9.6 17.3 22.4

Gains on disposition of property and other assets (6.4) (4.0) (1.1)

(Increase) decrease in other assets (7.6) (0.9) 6.4

Increase (decrease) in other liabilities 11.5 4.2 (1.7)

Changes in current assets and liabilities:

(Increase) decrease in receivables (13.5) 99.0 (80.9)

(Increase) decrease in inventories 32.6 (22.7) (29.9)

(Increase) decrease in other current assets 1.9 (11.6) (10.8)

Increase (decrease) in accounts payable 43.5 3.5 20.6

Increase (decrease) in advance billings (31.6) 49.3 7.7

Increase (decrease) in accrued liabilities (29.1) 15.1 12.5

Investing activities:

Proceeds from disposition of property and other assets 9.6 8.9 10.2

Acquisitions, net of cash acquired (455.7) (32.9) (333.2)

Proceeds from divestitures — — 3.3

Net cash required by investing activities (528.2) (109.4) (364.5)

Financing activities:

Proceeds from issuance of debt 251.4 — 180.0

Shares repurchased (8.0) (11.0) (3.0)

Dividends paid to common shareholders (9.8) (9.9) —

Purchase of shares to satisfy employee tax on vested stock (3.8) (4.4) (0.5)

Capital contribution from Former Parent — — 200.0

Net transfers to Former Parent and affiliates — — (34.5)

Net cash provided by (required by) financing activities 123.7 (108.4) 338.6

Net increase (decrease) in cash and cash equivalents (144.6) 141.0 92.6

Cash and cash equivalents at beginning of period 240.4 99.4 6.8

Cash and cash equivalents at end of period $ 95.8 $ 240.4 $ 99.4

Income tax payments for the years ended 2020, 2019, and 2018 were $36.9 million, $18.8 million, and $0.6 million, respectively.

See accompanying Notes to Consolidated and Combined Financial Statements.

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Arcosa, Inc. and Subsidiaries

Consolidated and Combined Statements of Stockholders’ Equity

CommonStock TreasuryStock

(in millions, except par value)

Cumulative effect of adopting new accounting standards (4.0) — — — — — — — (4.0)

Other comprehensive income — — — — — 2.1 — — 2.1

Capital contribution from Former Parent 200.0 — — — — — — — 200.0

Net transfers from Former Parent and affiliates (1.2) — — — — — — — (1.2)

Cash dividends on common stock — — — — (2.4) — — — (2.4)

Restricted shares, net 8.3 — — 1.6 — — — (0.5) 9.4

Shares repurchased — — — — — — (0.1) (3.0) (3.0)

Other comprehensive loss — — — — — (2.0) — — (2.0)

Cash dividends on common stock — — — — (9.9) — — — (9.9)

Shares repurchased — — — — — — (0.4) (11.0) (11.0)

Retirement of treasury stock — (0.7) — (20.2) — — 0.7 20.2 —

Other — — — 5.2 — — — — 5.2

Other comprehensive loss — — — — — (2.4) — — (2.4)

Cash dividends on common stock — — — — (9.8) — — — (9.8)

Shares repurchased — — — — — — (0.2) (8.0) (8.0)

Retirement of treasury stock — (0.4) — (15.1) — — 0.4 15.1 —

Other — — — (0.8) — — — — (0.8)

See accompanying Notes to Consolidated and Combined Financial Statements.

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Arcosa, Inc. and Subsidiaries

Notes to Consolidated and Combined Financial Statements

Note 1. Overview and Summary of Significant Accounting Policies

Basis of Presentation

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.

Following the Separation, the consolidated financial statements include the accounts of the Company and its subsidiaries and no longer include any allocations from Trinity.

All normal and recurring adjustments necessary for a fair presentation of the financial position of the Company and the results of operations and cash flows have been made in conformity with GAAP. All significant intercompany accounts and transactions have been eliminated.

Relationship with Former Parent and Related Entities

Prior to the Separation, Arcosa was managed and operated in the normal course of business with other business units of Trinity. The accompanying combined financial results for periods prior to the Separation include sales and purchase transactions with Trinity and its subsidiaries in addition to certain shared costs which have been allocated to Arcosa and reflected as expenses in the Combined Statements of Operations. Transactions and allocations between Trinity and Arcosa are reflected in equity in the Combined Statement of Stockholders' Equity as Former Parent's net investment and in the Combined Statements of Cash Flows as a financing activity in Net transfers from/(to) Former Parent and affiliates. All transactions and allocations between Trinity and Arcosa prior to the Separation have been deemed paid between the parties, in cash, in the period in which the transaction or allocation was recorded in the Combined Financial Statements. Disbursements and cash receipts were made through centralized accounts payable and cash collection systems, respectively, which were operated by Trinity. As cash was disbursed and received by Trinity, it was accounted for by Arcosa through the Former Parent's net investment account. Allocations of current income taxes receivable or payable prior to the Separation were deemed to have been remitted to Arcosa or Trinity, respectively, in cash, in the period to which the receivable or payable applies.

Corporate Costs/Allocations

The combined financial results include an allocation of costs related to certain corporate functions incurred by Trinity for services that are provided to or on behalf of Arcosa. Corporate costs have been allocated to Arcosa using methods management believes are consistent and reasonable. Such cost allocations to Arcosa consist of (1) shared service charges and (2) corporate overhead costs. Shared service charges consist of monthly charges to each Trinity business unit for certain corporate functions such as information technology, human resources, and legal based on usage rates and activity units. Corporate overhead costs consist of costs not previously allocated to Trinity's business units and were allocated to Arcosa based on an analysis of each cost function and the relative benefits received by Arcosa for each of the periods. Corporate overhead costs allocated to Arcosa prior to the Separation totaled $26.0 million for the ten months ended October 31, 2018. Corporate overhead costs are included in selling, general, and administrative expenses in the accompanying Consolidated and Combined Statements of Operations. Also see Note 4 Segment Information.

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The Consolidated and Combined Financial Statements of Arcosa for the year ended December 31, 2018 may not include all of the actual expenses that would have been incurred had we operated as a standalone company during the periods presented and may not reflect our combined results of operations, financial position, and cash flows had we operated as a standalone company during the period. Actual costs that would have been incurred if we had operated as a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. We also may incur additional costs associated with being a standalone, independent, publicly-traded company that were not included in the expense allocations and, therefore, would result in additional costs that are not reflected in our historical results of operations, financial position, and cash flows.

Other Transactions with Trinity Businesses

For the year ended December 31, 2018, the Company had sales to Trinity businesses of $160.3 million and purchases from Trinity businesses of $44.5 million. Subsequent to the Separation, Trinity is no longer considered a related entity.

Stockholders' Equity

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. The new program replaced the previous program which expired on December 31, 2020. Under the previous program, the Company repurchased 184,772 shares at a cost of $8.0 million during the year ended December 31, 2020. During the year ended December 31, 2019, the Company repurchased 361,442 shares at a cost of $11.0 million.

Prior to the Separation, the Company filed its Restated Certificate of Incorporation which authorizes the issuance of 200 million shares of common stock at a par value of $0.01 per share.

Revenue Recognition

Construction Products

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.

Engineered Structures

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 December 31, 2020 and 2019, we had a contract asset of $82.8 million and $50.8 million, respectively, which is included in receivables, net of allowance, within the Consolidated Balance Sheets. The increase in the contract asset in 2020 is attributed to an increase in finished structures that had not yet been delivered to customers. 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.

Transportation Products

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

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Unsatisfied Performance Obligations

The following table includes estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied or partially satisfied as of December 31, 2020 and the percentage of the outstanding performance obligations as of December 31, 2020 expected to be delivered during 2021:

Unsatisfied performance obligations at

TotalAmount Percent expected to be delivered in 2021

(in millions)

Engineered Structures:

Utility, wind, and related structures $ 334.0 100 %

Transportation Products:

The remainder of the unsatisfied performance obligations for storage tanks are expected to be delivered during 2022.

Income Taxes

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.

Prior to the Separation, the Company’s operating results were included in the Former Parent’s various consolidated U.S. federal and state income tax returns, as well as non-U.S. tax filings. In the Company’s Combined Financial Statements for the periods prior to the Separation, income tax expense and deferred tax balances have been recorded as if the Company filed tax returns on a standalone basis separate from the Former Parent. The separate return method applies the accounting guidance for income taxes to the standalone financial statements as if the Company was a separate taxpayer and a standalone enterprise for the periods presented.

Financial Instruments

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 years ended December 31, 2020, 2019, and 2018 was not significant. The carrying values of cash, receivables, and accounts payable are considered to be representative of their respective fair values.

Inventories

Inventories are valued at the lower of cost or net realizable value. Cost is determined principally on the first in first out method. The value of inventory is adjusted for damaged, obsolete, excess, or slow-moving inventory. Work in process and finished goods include material, labor, and overhead. During the year ended December 31, 2018, the Company recorded a $6.1 million write-off on finished goods inventory related to an order for a single customer in our utility structures business.

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Property, Plant, and Equipment

Property, plant, and equipment are stated at cost and depreciated or depleted over their estimated useful lives, primarily using the straight-line method. The estimated useful lives are: buildings and improvements - 3 to 30 years; leasehold improvements - the lesser of the term of the lease or 11 years; and machinery and equipment - 2 to 15 years. Depletion of mineral reserves is calculated based on estimated proven and probable reserves using the units-of-production method on a quarry-by-quarry basis. The costs of ordinary maintenance and repair are charged to operating costs as incurred.

Goodwill and Intangible Assets

Goodwill is required to be tested for impairment annually, or on an interim basis when events or changes in circumstances indicate the carrying amount may not be recoverable. The quantitative goodwill impairment test is assessed at the “reporting unit” level by comparing the reporting unit's estimated fair value with the carrying amount of its net assets. If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized. The goodwill impairment is measured as the excess of the reporting unit's carrying value over its fair value, not to exceed the amount of goodwill allocated to the reporting unit. The estimates and judgments that most significantly affect the fair value calculations are assumptions, consisting of level three inputs, related to revenue and operating profit growth, discount rates, and exit multiples. As of December 31, 2020 and 2019, the Company's annual impairment test of goodwill was completed at the reporting unit level and no impairment charges were determined to be necessary.

Intangible assets are recorded at fair value, using level three inputs, on the date of acquisition and evaluated to determine their estimated useful life. These assets primarily consist of customer relationships and permits and are amortized using the straight-line method. The estimated useful lives for definite-lived intangible assets are: customer relationships - 5 to 15 years; permits - 10 to 29 years; and other - 1 to 10 years.

Indefinite-lived intangible assets primarily relate to an acquired trademark. These assets are not amortized but are evaluated for impairment annually, or on an interim basis when events or changes in circumstances indicate the carrying amount may not be recoverable. The impairment test compares the fair value of each asset to its carrying value using a relief from royalty method. As of December 31, 2020 and 2019, the Company's annual impairment test was completed and no impairment charges were determined to be necessary.

Long-lived Assets

The Company evaluates the carrying value of long-lived assets to be held and used, including property, plant, and equipment and definite-lived intangibles, for potential impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. The carrying value of long-lived assets to be held and used is considered impaired only when the carrying value is not recoverable through undiscounted future cash flows and the fair value of the assets is less than their carrying value. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risks involved or market quotes as available. Impairment losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced by the estimated cost to dispose of the assets.

The Company recorded impairment charges of $7.1 million during the year ended December 31, 2020 related to assets that were disposed of during the year. No impairment charges were recognized during the year ended December 31, 2019. See Note 2 Acquisitions and Divestitures for discussion of the impairment charge recorded during the year ended December 31, 2018 on businesses that were subsequently divested.

Workers’Compensation

The Company is effectively self-insured for workers’ compensation claims. A third-party administrator is used to process claims. We accrue our workers' compensation liability based upon independent actuarial studies.

Warranties

The Company provides various express, limited product warranties that generally range from 1 to 5 years depending on the product. The warranty costs are estimated using a two-step approach. First, an engineering estimate is made for the cost of all claims that have been asserted by customers. Second, based on historical, accepted claims experience, a cost is accrued for all products still within a warranty period for which no claims have been filed. The Company provides for the estimated cost of product warranties at the time revenue is recognized related to products covered by warranties and assesses the adequacy of the resulting reserves on a quarterly basis. As of December 31, 2020 and 2019, the Company's accrual for warranty costs was $3.1 million and $2.6 million, respectively, which is included in accrued liabilities within the Consolidated Balance Sheets.

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Derivative Instruments

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.

Foreign Currency Translation

Certain operations outside the U.S. prepare financial statements in currencies other than the U.S. dollar. The income statement amounts are translated at average exchange rates for the year, while the assets and liabilities are translated at year-end exchange rates. Translation adjustments are accumulated as a separate component of stockholders' equity and other comprehensive income. The functional currency of our Mexico operations is considered to be the U.S. dollar. The functional currency of our Canadian operations is considered to be the Canadian dollar.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) consists of foreign currency translation adjustments and the effective unrealized gains and losses on the Company's derivative financial instruments, the sum of which, along with net income, constitutes comprehensive net income (loss). See Note 12 Accumulated Other Comprehensive Loss. All components are shown net of tax.

Recent Accounting Pronouncements

Recently adopted accounting pronouncements

Effective as of January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”), which provides common revenue recognition guidance for GAAP. Under ASU 2014-09, an entity recognizes revenue when it transfers promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. It also requires additional detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenues and cash flows arising from contracts with customers.

The primary impact of adopting the standard is a change in the timing of revenue recognition for our wind towers, certain utility structures, and certain storage tank product lines within our Engineered Structures segment. Previously, the Company recognized revenue when the product was delivered. Under ASU 2014-09, revenue is recognized over time as the products are manufactured. Revenue recognition policies in our other business segments remain substantially unchanged.

Effective as of January 1, 2019, the Company adopted Accounting Standards Update No. 2016-02, “Leases”, (“ASU 2016-02”), which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The Company elected to use the optional transition method that allows the Company to apply the provisions of the standard at the effective date without adjusting the comparative prior periods. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard which allowed us to carry forward the historical lease classification. The cumulative effect of adopting the standard on the opening balance of retained earnings was not significant.

The primary impact of adopting the standard was the recognition of a right-of-use asset and corresponding lease liability for our operating leases included in other assets and other liabilities, respectively, on the Consolidated Balance Sheet. See Note 8 Leases for further discussion.

The Company has implemented processes and a lease accounting system to ensure adequate internal controls were in place to assess our contracts and enable proper accounting and reporting of financial information upon adoption.

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 and Combined Financial Statements.

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Recently issued accounting pronouncements not adopted as of December 31, 2020

In December 2019, the FASB issued 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. ASU 2019-12 will become effective for public companies during interim and annual reporting periods beginning after December 15, 2020, with early adoption permitted. We do not expect this standard to have a material impact on our 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.

Management's Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain prior year balances have been reclassified in the Consolidated and Combined Financial Statements to conform with the 2020 presentation.

Note 2. Acquisitions and Divestitures

The Company's acquisition and divestiture activities are summarized below:

Year Ended December 31,

(in millions)

Acquisitions:

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2020 Acquisitions

Cherry Industries, Inc.

On January 6, 2020, we completed the stock acquisition of Cherry Industries, Inc. and affiliated entities (“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 year ended December 31, 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 $3.0 million during the year ended December 31, 2020 and approximately $0.5 million during the year ended December 31, 2019. 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 or liabilities. The following table represents our final purchase price allocation as of December 31, 2020:

(in millions)

Accounts receivable $ 30.5

Inventories 11.8

Property, plant, and equipment 58.8

Mineral reserves 17.2

Customer relationships 62.1

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 $173.2 million and $25.2 million, respectively, during the year ended December 31, 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.

(in millions)

Income before income taxes $ 144.5 $ 163.8

Other Acquisitions - 2020

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 preliminary 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.

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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 preliminary 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 preliminary 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 preliminary valuations of the assets acquired and liabilities assumed at their acquisition date fair value using level three inputs. The preliminary valuation resulted in the recognition of $48.2 million of permits with an initial weighted average useful life of 22.8 years and $7.4 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. Adjustments to the preliminary purchase price allocation could be material to the purchase price allocation, particularly with respect to our preliminary estimates of identified intangible assets.

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.

2019 Acquisitions

In June 2019, we completed the acquisition of certain assets and liabilities of an inland barge components business within our Transportation Products segment. We also completed the acquisition of certain assets and liabilities of a natural aggregates business in our Construction Products segment. The total purchase price for the businesses acquired was $27.6 million, a portion of which includes estimated royalties to be paid to the seller of the natural aggregates business over the next 10 years. The acquisitions were recorded as business combinations with the assets acquired and liabilities assumed recorded at their acquisition date fair value using level three inputs. The valuation resulted in the recognition of $10.4 million of goodwill in our Transportation Products segment and $1.6 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 August 2019, we completed acquisitions of certain assets and liabilities of two natural aggregates businesses in our Construction Products segment for a total purchase price of $9.4 million. The acquisitions were recorded as business combinations with the assets acquired and liabilities assumed recorded at their acquisition date fair value using level three inputs. The valuation resulted in the recognition of $1.1 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.

2018 Acquisitions

ACG Materials

On December 5, 2018, we completed the stock acquisition of ACG Materials (“ACG”), a producer of specialty materials and aggregates which is included in our Construction Products segment. The purchase price of $309.1 million was funded with a combination of cash on-hand and a $180.0 million borrowing under the Company's credit facility. Acquisition-related transaction costs incurred after the Separation were insignificant. Costs incurred by the Former Parent prior to the Separation were included in the allocation of corporate costs in accordance with the methodology described in Note 1.

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ACA US Equity

ACA · 10-K · period ended 2020-12-31

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8.Financial Statements and Supplementary Data.

ACA US Equity☆

ACA · 10-K · period ended 2020-12-31

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8.Financial Statements and Supplementary Data.

ACA US Equity