| Summary of Significant Accounting Policies | Overview and Summary of Significant Accounting Policies Basis of Presentation On November 1, 2018, Arcosa, Inc. and its consolidated subsidiaries ("Arcosa," the “Company,” "we," or "our") became an independent publicly-traded company as a result of the distribution by Trinity Industries, Inc. (“Trinity” or "Former Parent") of 100% of the outstanding shares of Arcosa, Inc. to Trinity’s stockholders (the “Separation”). Trinity stockholders received one share of Arcosa, Inc. common stock for every three shares of Trinity common stock held as of 5:00 p.m. local New York City time on October 17, 2018, the record date for the distribution. The transaction was structured to be tax-free to both Trinity and Arcosa stockholders for U.S. federal income tax purposes. 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, engineering, 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. 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 Balance Sheets 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 , $39.3 million , and $31.4 million for the ten months ended October 31, 2018 and the years ended December 31, 2017 and 2016 , respectively. Corporate overhead costs are included in selling, engineering, and administrative expenses in the accompanying Consolidated and Combined Statements of Operations. Also see Note 4 Segment Information. The Consolidated and Combined Financial Statements of Arcosa 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 periods presented. 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 Other transactions with Trinity businesses for purchases or sales of products and services are as follows: Year Ended December 31, 2018 2017 2016 (in millions) Sales by Arcosa to Trinity businesses $ 160.3 $ 148.3 $ 187.2 Purchases by Arcosa from Trinity businesses $ 44.5 $ 53.2 $ 44.2 Stockholders' Equity In December 2018 , the Company’s Board of Directors authorized a $50 million share repurchase program effective December 5, 2018 through December 31, 2020 . During December 2018, the Company repurchased 124,272 shares at a cost of $3.0 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 Revenue is measured based on the allocation of the transaction price in a contract to satisfied performance obligations. The transaction price does not include any amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. The following is a description of principal activities from which the Company generates its revenue, separated by reportable segments. Payments for our products and services are generally due within normal commercial terms. For a further discussion regarding the Company’s reportable segments, see Note 4 Segment Information. Construction Products Group The Construction Products Group recognizes revenue when the customer has accepted the product and legal title of the product has passed to the customer. Energy Equipment Group Within the Energy Equipment Group, revenue is recognized for our wind tower and certain utility structure 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 Group The Transportation Products Group recognizes revenue when the customer has accepted the product and legal title of the product has passed to the customer. 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, 2018 and the percentage of the outstanding performance obligations as of December 31, 2018 expected to be delivered during 2019: Unsatisfied performance obligations at December 31, 2018 Total Percent expected to be delivered in 2019 (in millions) Energy Equipment Group: Wind towers and utility structures $ 633.1 64.0 % Other $ 55.1 100.0 % Transportation Products Group: Inland barges $ 230.5 94.0 % The remainder of the unsatisfied performance obligations for wind towers and utility structures and inland barges are expected to be delivered through 2020 . Income Taxes Income taxes as presented in the Consolidated and Combined Financial Statements attribute current and deferred income taxes of Trinity to Arcosa’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 Consolidated and Combined Financial Statements of Arcosa. Similarly, the tax treatment of certain items reflected in the Consolidated and Combined 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. 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. Financial Instruments The Company considers all highly liquid debt instruments to be either 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 investment grade, short-term debt instruments and 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, 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 collectibility of all receivables. Receivable balances determined to be uncollectible are charged against the allowance. 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. Property, Plant, and Equipment Property, plant, and equipment are stated at cost and depreciated over their estimated useful lives 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 7 years ; machinery and equipment - 2 to 10 years ; and information systems hardware and software - 2 to 5 years . The costs of ordinary maintenance and repair are charged to operating costs as incurred. Long-lived Assets The Company periodically evaluates 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. See Note 2 Acquisitions and Divestitures for discussion of the impairment charge recorded during the year on businesses that were subsequently divested. Based on the Company's evaluations, no additional impairment charges were determined to be necessary as of December 31, 2018 and 2017 . Goodwill and Intangible Assets 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 a two-step process with step one requiring the comparison of the reporting unit's estimated fair value with the carrying amount of its net assets. If necessary, step two of the impairment test determines the amount of goodwill impairment to be recorded when the reporting unit's recorded net assets exceed its fair value. Impairment is assessed at the “reporting unit” level by applying a fair value-based test for each unit with recorded goodwill. 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, 2018 and 2017 , the Company's annual impairment test of goodwill was completed at the reporting unit level and no impairment charges were determined to be necessary. The net book value of intangible assets totaled $55.2 million and $64.4 million as of December 31, 2018 and 2017 , respectively, and included $34.1 million not subject to amortization related to an acquired trademark. The remaining intangible assets with a gross cost of $44.6 million and $55.0 million as of December 31, 2018 and 2017 , are amortized over their estimated useful lives ranging from 1 to 12 years , and primarily relate to acquired customer relationships. Aggregate amortization expense from intangible assets was $4.7 million , $5.0 million , and $5.3 million for the years ended December 31, 2018 , 2017 and 2016 , respectively. Intangible assets were evaluated for potential impairment as of December 31, 2018 and 2017 . Insurance 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 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. As of December 31, 2018 and 2017, the Company's accrual for warranty costs was $2.9 million and $2.6 million , respectively, which is included in accrued liabilities within the Consolidated and Combined Balance Sheets. Derivative Instruments The Company may, from time to time, use derivative instruments to mitigate the impact of changes in interest rates 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 11 Accumulated Other Comprehensive Loss. All components are shown net of tax. Recent 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 Company applied ASU 2014-09 to all contracts that were not complete as of January 1, 2018 using the modified retrospective method of adoption, resulting in a reduction to Former Parent's Net Investment of $4.0 million , net of tax, as of January 1, 2018 related to the cumulative effect of applying this standard. Therefore, the comparative information for the years ended December 31, 2017 and December 31, 2016 have not been adjusted and continue to be reported under ASC Topic 605. The primary impact of adopting the standard is a change in the timing of revenue recognition for our wind towers and certain utility structures product lines within our Energy Equipment Group. 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. The following tables summarize the impact of adopting ASU 2014-09 on the Company’s Consolidated and Combined Financial Statements as of December 31, 2018 and the twelve months then ended: As Reported Adjustments Balance without adjustment for adoption of ASU 2014-09 (in millions) Consolidated and Combined Statement of Operations Revenues 1,460.4 (24.1 ) 1,436.3 Cost of revenues 1,188.4 (17.8 ) 1,170.6 Operating profit 94.9 (6.2 ) 88.7 Income before income taxes 95.0 (6.2 ) 88.8 Provision for income taxes 19.3 (1.4 ) 17.9 Net income 75.7 (4.8 ) 70.9 Consolidated and Combined Balance Sheet Receivables, net of allowance (1) 291.4 (46.5 ) 244.9 Inventories: Raw materials 128.4 — 128.4 Work in process 33.3 17.8 51.1 Finished goods 90.8 27.8 118.6 Accrued liabilities 146.2 (0.2 ) 146.0 Deferred income taxes 58.3 (0.1 ) 58.2 Capital in excess of par value 1,685.7 5.0 1,690.7 Retained earnings 19.5 (5.6 ) 13.9 Consolidated and Combined Statement of Cash Flows Operating activities: Net income 75.7 (4.8 ) 70.9 Provisions for deferred income taxes 22.4 (1.3 ) 21.1 (Increase) decrease in receivables (80.9 ) 38.6 (42.3 ) (Increase) decrease in inventories (29.9 ) (17.8 ) (47.7 ) Increase (decrease) in accrued liabilities 20.2 (14.7 ) 5.5 Net cash provided by operating activities 118.5 — 118.5 (1) The increase in the receivables balance at December 31, 2018 from the adoption of ASU 2014-09 represents our balance of contract receivables for which we have recognized revenues but have not yet billed our customers. In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2016-02, "Leases", ("ASU 2016-02") which amended the previous accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 became effective for public companies during interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company adopted ASU 2016-02 effective January 1, 2019 using the optional transition method that allows the Company to apply the guidance only to the most current period presented in the financial statements. Any cumulative effect of initially applying the standard will result in an adjustment to the opening balance of retained earnings as of the date of adoption. We do not expect the cumulative effect adjustment to be significant, nor do we expect the standard to have a material impact on our results of operations or cash flows. We expect the standard to increase total assets by approximately 1% . 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. In February 2018, the FASB issued Accounting Standards Update No. 2018-02, “Income Statement - Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”, (“ASU 2018-02”) which gives entities the option to reclassify from AOCL to retained earnings the stranded tax effects resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017 (the "Act"). ASU 2018-02 became effective for public companies during interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company elected to adopt ASU 2018-02 as of January 1, 2018 resulting in a reclassification adjustment from AOCL for the twelve months ended December 31, 2018 which was not significant. 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. |
