Company: ACA
Filing Date: 2025-01-10
Form Type: CORRESP
Source: 0001739445-25-000006
Chunk: 2

Company: Arcosa, Inc.
Filing Date: 2025-01-10
Form: CORRESP
Chunk 2
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 entity’s operations and financial results could include a disposal of a major geographical area, a major line of business, a major equity method investment, or other major parts of an entity.” We considered this guidance both from a qualitative and quantitative basis.

From a qualitative perspective, the storage tanks business was not core to the Company’s long-term strategy, a position held consistently since the Company’s spin-off from its

former parent in 2018. At spin-off, we outlined a strategy to our investors that included growing our core businesses, which we identified as construction materials and utility and related structures, while reducing the complexity of our overall business portfolio. The Company’s storage tanks business was a legacy business that was not part of the Company’s focus on strategic growth in select markets. Aligning with its strategy, the Company focused on improving the profitability of the storage tanks business to maximize its value in preparation for an eventual divestiture, culminating with the divesture of the business in 2022. The divestiture of the business was a continuation of our strategy set out at spin, rather than a “strategic shift”. Furthermore, the storage tanks business was not prominently discussed in MD&A disclosures. In fact, as recently as 2020 the storage tanks business had been referred to as “Other” revenue within the Company’s disclosure of disaggregated revenue within its engineered structures segment.

Quantitatively, we compared the significance of the storage tanks business to the Company overall in terms of revenue, operating profit, adjusted EBITDA, and total assets, noting that in each case for the three years leading up to the divesture, the storage tanks business represented approximately 10% or less of revenue, operating profit, and adjusted EBITDA and less than 6% of total assets. The lone outlier to these trends was in 2021 when the storage tanks business represented approximately 30% of the Company’s operating profit and approximately 16% of its adjusted EBITDA (while still only representing approximately 10% of the Company’s revenue in that year), however this outlier was primarily attributable to the downturns experienced in our other businesses during that year.

We believe the FASB’s use of the word “major” in ASC 205-20-45-1C intended a relatively high bar for a disposal to be considered a strategic shift on a quantitative basis. Based on our analysis of both qualitative and quantitative factors, we determined that the sale of the storage tanks business did not meet the definition of a “strategic shift” that