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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended
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Sep. 29, 2018
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Condensed Consolidated Financial Statements The Condensed Consolidated Balance Sheet as of September 29, 2018, the Condensed Consolidated Statements of Earnings and Comprehensive Income for the thirteen and thirty-nine weeks ended September 29, 2018 and September 30, 2017, and the Condensed Consolidated Statements of Cash Flows and Shareholders' Equity for the thirty-nine week periods then ended have been prepared by the Company, without audit. In the opinion of management, all necessary adjustments (which include normal recurring adjustments) have been made to present fairly the financial statements as of September 29, 2018 and for all periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 2017. The accounting policies and methods of computation followed in these interim financial statements are the same as those followed in the financial statements for the year ended December 30, 2017 with the exception of the revenue recognition accounting policy which changed from adopting ASU 2014-09 and is discussed later within this footnote. The results of operations for the period ended September 29, 2018 are not necessarily indicative of the operating results for the full year. Inventories Approximately 35% and 37% of inventory is valued at the lower of cost, determined on the last-in, first-out (LIFO) method, or market as of September 29, 2018 and December 30, 2017. All other inventory is valued at the lower of cost, determined on the first-in, first-out (FIFO) method or market. Finished goods and manufactured goods inventories include the costs of acquired raw materials and related factory labor and overhead charges required to convert raw materials to manufactured and finished goods. The excess of replacement cost of inventories over the LIFO value is approximately $49,239 and $43,727 at September 29, 2018 and December 30, 2017, respectively. Inventories consisted of the following:
| September 29, 2018 |  | December 30, 2017
Raw materials and purchased parts | $ | 202,517 |  |  | $ | 183,029 |
Work-in-process | 24,046 |  |  | 30,671 |
Finished goods and manufactured goods | 222,581 |  |  | 250,975 |
Subtotal | 449,144 |  |  | 464,675 |
Less: LIFO reserve | 49,239 |  |  | 43,727 |
| $ | 399,905 |  |  | $ | 420,948 |
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries for the thirteen and thirty-nine weeks ended September 29, 2018 and September 30, 2017, were as follows:
| Thirteen Weeks Ended |  | Thirty-nine Weeks Ended
| 2018 |  | 2017 |  | 2018 |  | 2017
United States | $ | 15,596 |  |  | $ | 28,886 |  |  | $ | 99,697 |  |  | $ | 115,082 |
Foreign | 486 |  |  | 21,675 |  |  | 18,482 |  |  | 59,210 |
| $ | 16,082 |  |  | $ | 50,561 |  |  | $ | 118,179 |  |  | $ | 174,292 |
The Company estimated and recognized provisional amounts at December 30, 2017 for the following aspect of the 2017 Tax Cuts and Jobs Act ("2017 Tax Act") and updated the amounts as of September 29, 2018:
• | Deemed Repatriation transition tax: The Deemed Repatriation transition tax (“Transition Tax”) is a tax on unremitted foreign earnings of certain foreign subsidiaries, which subjected the Company's unremitted foreign earnings of $393,962 to tax at certain specified rates less associated foreign tax credits, a decrease of $6,038 from the December 30, 2017 estimate. The Company recorded a provisional Transition Tax obligation of $9,436, a decrease of $454 from the December 30, 2017 estimate.
• | Indefinite reinvestment assertion: The Company's position remains that unremitted foreign earnings subject to the Transition Tax are not indefinitely reinvested. The Company recorded a provisional amount of the deferred income taxes for foreign withholding taxes and U.S. state income taxes of $10,713 and $1,300, respectively. This was an increase of $340 from the December 30, 2017 estimate related to foreign withholding taxes.
• | Adjustments to these 2017 Tax Act amounts, as discussed above, were recognized during the third quarter of 2018. However, the Company may adjust these provisional amounts in the fourth quarter of 2018 after assessing additional implementation guidance as it becomes available.
Pension Benefits The Company incurs expenses in connection with the Delta Pension Plan ("DPP"). The DPP was acquired as part of the Delta plc acquisition in fiscal 2010 and has no members that are active employees. In order to measure expense and the related benefit obligation, various assumptions are made including discount rates used to value the obligation, expected return on plan assets used to fund these expenses and estimated future inflation rates. These assumptions are based on historical experience as well as current facts and circumstances. An actuarial analysis is used to measure the expense and liability associated with pension benefits. The components of the net periodic pension (benefit) expense for the thirteen and thirty-nine weeks ended September 29, 2018 and September 30, 2017 were as follows:
| Thirteen Weeks Ended |  | Thirty-nine Weeks Ended
Net periodic (benefit) expense: | 2018 |  | 2017 |  | 2018 |  | 2017
Interest cost | $ | 4,400 |  |  | $ | 4,676 |  |  | $ | 13,602 |  |  | $ | 13,475 |
Expected return on plan assets | (5,704 | ) |  | (5,277 | ) |  | (17,633 | ) |  | (15,208 | )
Amortization of actuarial loss | 750 |  |  | 768 |  |  | 2,318 |  |  | 2,214 |
Net periodic expense (benefit) | $ | (554 | ) |  | $ | 167 |  |  | $ | (1,713 | ) |  | $ | 481 |
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Stock Plans The Company maintains stock‑based compensation plans approved by the shareholders, which provide that the Human Resource Committee of the Board of Directors may grant incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, and bonuses of common stock. At September 29, 2018, 1,683,908 shares of common stock remained available for issuance under the plans. Under the plans, the exercise price of each option equals the closing market price at the date of the grant. Options vest beginning on the first anniversary of the grant in equal amounts over three to six years or on the grant's fifth anniversary. Expiration of grants is from seven to ten years from the date of grant. Restricted stock units and awards generally vest in equal installments over three years beginning on the first anniversary of the grant. The Company's compensation expense (included in selling, general and administrative expenses) and associated income tax benefits related to stock options and restricted stock for the thirteen and thirty-nine weeks ended September 29, 2018 and September 30, 2017, respectively, were as follows:
| Thirteen Weeks Ended |  | Thirty-nine Weeks Ended
| 2018 |  | 2017 |  | 2018 |  | 2017
Compensation expense | $ | 2,702 |  |  | $ | 2,710 |  |  | $ | 8,076 |  |  | $ | 7,300 |
Income tax benefits | 676 |  |  | 1,043 |  |  | 2,019 |  |  | 2,811 |
Fair Value The Company applies the provisions of Accounting Standards Codification 820, Fair Value Measurements (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of ASC 820 apply to other accounting pronouncements that require or permit fair value measurements. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three‑level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value. Trading Securities: The assets and liabilities recorded for the investments held in the Valmont Deferred Compensation Plan of $39,521 ($39,091 at December 30, 2017) represent mutual funds, invested in debt and equity securities, classified as trading securities in accordance with Accounting Standards Codification 320, Accounting for Certain (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments in Debt and Equity Securities, considering the employee's ability to change investment allocation of their deferred compensation at any time. The Company's ownership of shares in Delta EMD Pty. Ltd. (JSE:DTA) is also classified as trading securities. The shares are valued at $1,954 and $1,951 as of September 29, 2018 and December 30, 2017, respectively, which is the estimated fair value. Quoted market prices are available for these securities in an active market and therefore categorized as a Level 1 input.
|  |  | Fair Value Measurement Using:
| Carrying Value September 29, 2018 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets: |  |  |  |  |  |  |
Trading Securities | $ | 41,475 |  |  | $ | 41,475 |  |  | $ | — |  |  | $ | — |
|  |  | Fair Value Measurement Using:
| Carrying Value December 30, 2017 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets: |  |  |  |  |  |  |
Trading Securities | $ | 41,042 |  |  | $ | 41,042 |  |  | $ | — |  |  | $ | — |
Long-Lived Assets The Company's other non-financial assets include goodwill and other intangible assets, which are classified as Level 3 items. These assets are measured at fair value on a non-recurring basis as part of annual impairment testing. Note 5 to these condensed consolidated financial statements contain additional information related to goodwill and intangible asset impairments. Comprehensive Income Comprehensive income includes net earnings, currency translation adjustments, certain derivative-related activity and changes in net actuarial gains/losses from a pension plan. Results of operations for foreign subsidiaries are translated using the average exchange rates during the period. Assets and liabilities are translated at the exchange rates in effect on the balance sheet dates. Accumulated other comprehensive income (loss) consisted of the following at September 29, 2018 and December 30, 2017:
| Foreign Currency Translation Adjustments |  | Gain/(Loss) on Hedging Activities |  | Defined Benefit Pension Plan |  | Accumulated Other Comprehensive Loss
Balance at December 30, 2017 | $ | (171,399 | ) |  | $ | 6,357 |  |  | $ | (113,980 | ) |  | $ | (279,022 | )
Current-period comprehensive income (loss) | (53,569 | ) |  | (381 | ) |  | — |  |  | (53,950 | )
Divestiture of grinding media business | 9,203 |  |  | 1,215 |  |  | — |  |  | 10,418 |
Balance at September 29, 2018 | $ | (215,765 | ) |  | $ | 7,191 |  |  | $ | (113,980 | ) |  | $ | (322,554 | )
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Subsequent Events On October 18, 2018, the Company acquired CSP Coating Systems of Auckland, New Zealand, to further strengthen the Company's Asia-Pacific market position. CSP Coating Systems provides a wide range of coating services. The acquisition was funded with cash on hand and will be included in the Coatings segment. Revenue Recognition On December 31, 2017, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The Company elected to use the modified retrospective approach for the adoption of the new revenue standard. The cumulative effect of initially applying the new revenue standard was recorded as an adjustment to the opening balance of retained earnings, which impacted the Condensed Consolidated Balance Sheet as follows:
Balance Sheet | December 30, 2017 |  | ASC 606 Adjustments |  | December 31, 2017
Assets |  |  |  |  |
Inventories | $ | 420,948 |  |  | $ | (36,243 | ) |  | $ | 384,705 |
Contract asset - costs & profits in excess of billings | 16,165 |  |  | 51,507 |  |  | 67,672 |
Liabilities and shareholders' equity |  |  |  |  |
Accrued expenses | 81,029 |  |  | 2,043 |  |  | 83,072 |
Deferred income taxes | 34,906 |  |  | 3,450 |  |  | 38,356 |
Retained earnings | 1,954,344 |  |  | 9,771 |  |  | 1,964,115 |
The adoption of ASC 606 had the following impact on the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Earnings for the thirteen and thirty-nine weeks ended September 29, 2018:
Balance Sheet | As Reported |  | Balance Excluding ASC 606 Effects |  | Change
Assets |  |  |  |  |
Inventories | $ | 399,905 |  |  | $ | 463,184 |  |  | $ | (63,279 | )
Contract asset - costs & profits in excess of billings | 112,620 |  |  | 26,369 |  |  | 86,251 |
Liabilities and shareholders' equity |  |  |  |  |
Accrued expenses | 106,929 |  |  | 101,878 |  |  | 5,051 |
Deferred income taxes | 45,076 |  |  | 40,451 |  |  | 4,625 |
Retained earnings | 2,022,538 |  |  | 2,009,242 |  |  | 13,296 |
| Thirteen Weeks Ended September 29, 2018 |  | Thirty-nine Weeks Ended September 29, 2018
Statement of Earnings | As Reported |  | Balance Excluding ASC 606 Effects |  | Change |  | As Reported |  | Balance Excluding ASC 606 Effects |  | Change
Net Sales | 678,692 |  |  | $ | 666,095 |  |  | $ | 12,597 |  |  | 2,059,781 |  |  | $ | 2,024,921 |  |  | $ | 34,860 |
Operating Income | 38,360 |  |  | $ | 35,697 |  |  | $ | 2,663 |  |  | 165,990 |  |  | $ | 161,289 |  |  | $ | 4,701 |
The Company determines the appropriate revenue recognition for our contracts by analyzing the type, terms and conditions of each contract or arrangement with a customer. Contracts with customers for all businesses are fixed-price with sales tax excluded from revenue, and do not include variable consideration. Discounts included in contracts with customers, typically early pay discounts, are recorded as a reduction of net sales in the period in which the sale is recognized. Contract revenues are classified as product when the performance obligation is related to the manufacturing of goods. Contract (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) revenues are classified as service when the performance obligation is the performance of a service. Service revenue is primarily related to the Coatings segment. Customer acceptance provisions exist only in the design stage of our products and acceptance of the design by the customer is required before the project is manufactured and delivered to the customer. The Company is not entitled to any compensation solely based on design of the product and does not recognize revenue associated with the design stage. There is one performance obligation for revenue recognition. No general rights of return exist for customers once the product has been delivered and the Company establishes provisions for estimated warranties. The Company does not sell extended warranties for any of its products. Shipping and handling costs associated with sales are recorded as cost of goods sold. The Company elected to use the practical expedient of treating freight as a fulfillment obligation instead of a separate performance obligation and ratably recognize freight expense as the structure is being manufactured, when the revenue from the associated customer contract is being recognized over time. With the exception of the Utility segment and the wireless communication structures product line, the Company’s inventory is interchangeable for a variety of each segment’s customers. The Company elected the practical expedient to not disclose the partially satisfied performance obligation at the end of the period when the contract has an original expected duration of one year or less. In addition, the Company elected the practical expedient to not adjust the amount of consideration to be received in a contract for any significant financing component if payment is expected within twelve months of transfer of control of goods or services; the Company expects all consideration to be received in one year or less at contract inception. Segment and Product Line Revenue Recognition The global Utility segment revenues are derived from manufactured steel and concrete structures for the North America utility industry and offshore and other complex structures used in energy generation and distribution outside of the United States. Steel and concrete utility structures are engineered to customer specifications resulting in limited ability to sell the structure to a different customer if an order is canceled after production commences. The continuous transfer of control to the customer is evidenced either by contractual termination clauses or by our rights to payment for work performed to-date plus a reasonable profit as the products do not have an alternative use to the Company. Since control is transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment. For our steel and concrete utility and wireless communication structure product lines, we generally recognize revenue on an inputs basis, using total production hours incurred to-date for each order as a percentage of total hours estimated to produce the order. The completion percentage is applied to the order’s total revenue and total estimated costs to determine reported revenue, cost of goods sold and gross profit. Production of an order, once started, is typically completed within three months. Revenue from the offshore and other complex structures business is also recognized using an inputs method, based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. External sales agents are used in certain sales of steel and concrete structures; the Company has chosen to use the practical expedient to expense estimated commissions owed to third parties by recognizing them proportionately as the goods are manufactured. The global ESS segment revenues are derived from the manufacture and distribution of engineered metal, composite structures and components for lighting and traffic and roadway safety, engineered access systems, and wireless communication. For the lighting and traffic and roadway safety product lines, revenue is recognized upon shipment or delivery of goods to the customer depending on contract terms, which is the same point in time that the customer is billed. For Access Systems, revenue is generally recognized upon delivery of goods to the customer which is the same point in time that the customer is billed. The wireless communication product line has large regional customers who have unique product specifications for communication structures. When the customer contract includes a cancellation clause that would require them to pay for work completed plus a reasonable margin if an order was canceled, revenue is recognized over time based on hours worked as a percent of total estimated hours to complete production. For the remaining wireless communication product line customers which do not provide a contractual right to bill for work completed on a canceled order, revenue is recognized upon shipment or delivery of the goods to the customer which is the same point in time that the customer is billed. (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The global Coatings segment revenues are derived by providing coating services to customers’ products, which include galvanizing, anodizing, and powder coating. Revenue is recognized once the coating service has been performed and the goods are ready to be picked up or delivered to the customer which is the same time that the customer is billed. The global Irrigation segment revenues are derived from the manufacture of agricultural irrigation equipment and related parts and services for the agricultural industry and tubular products for industrial customers. Revenue recognition for the irrigation segment is generally upon shipment of the goods to the customer which is the same point in time that the customer is billed. The remote monitoring subscription services are primarily billed annually and revenue is recognized on a straight-line basis over the subsequent twelve months. Disaggregation of revenue by product line is disclosed in the Segment footnote. A breakdown by segment of revenue recognized over time and revenue recognized at a point in time for the thirteen and thirty-nine weeks ended September 29, 2018 is as follows:
| Point in Time |  | Over Time |  | Point in Time |  | Over Time
| Thirteen weeks ended September 29, 2018 |  | Thirteen weeks ended September 29, 2018 |  | Thirty-nine weeks ended September 29, 2018 |  | Thirty-nine weeks ended September 29, 2018
Utility Support Structures | $ | 6,090 |  |  | $ | 211,853 |  |  | $ | 6,090 |  |  | $ | 618,243 |
Engineered Support Structures | 235,948 |  |  | 12,483 |  |  | 680,863 |  |  | 29,525 |
Coatings | 74,547 |  |  | — |  |  | 217,544 |  |  | — |
Irrigation | 134,710 |  |  | 3,061 |  |  | 475,744 |  |  | 8,692 |
Other | — |  |  | — |  |  | 23,080 |  |  | — |
Total | $ | 451,295 |  |  | $ | 227,397 |  |  | $ | 1,403,321 |  |  | $ | 656,460 |
The Company's contract asset as of September 29, 2018 is $112,620. The contract assets attributable to the cumulative effect from the adoption of the new revenue recognition guidance was $51,507; the contract asset at December 30, 2017, attributable to the offshore and other complex structures product line, was $16,165. Both steel and concrete utility customers are generally invoiced upon shipment or delivery of the goods to the customer's specified location and there are normally no up-front or progress payments. The offshore and complex steel structures business invoices customers a number of ways including advanced billings, progress billings, and billings upon shipment. At September 29, 2018 and December 30, 2017, the contract liability for revenue recognized over time was $5,088 and $7,368. The contract liability is included in Accrued Expenses on the condensed consolidated balance sheets. During the thirty-nine weeks ended September 29, 2018, the Company recognized $4,456 of revenue that was included in the liability as of December 30, 2017. The revenue recognized was due to applying advance payments received for projects completed during the period. Recently Adopted Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-9, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") 605, Revenue Recognition. Effective December 31, 2017, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The Company elected the modified retrospective approach for the adoption of the new revenue standard, resulting in a credit to retained earnings being recognized for $9,771. The Company calculated the cumulative effect on revenue of approximately $51,507 with $13,121 of pre-tax operating income; these were customer orders for the steel utility, concrete utility, and wireless communication structures product lines at various stages of production at December 30, 2017. (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In March 2017, the FASB issued ASU 2017-07, Presentation of Net Periodic Benefit Cost Related to Defined Benefit Plans, which amends the income statement presentation requirements for the components of net periodic benefit cost for an entity's defined benefit pension and post-retirement plans. The Company adopted this ASU in the first quarter of 2018, recognizing the DPP net periodic pension expense within Other income (expense). The Company also reclassified $167 and $481 of DPP net periodic pension expense for third quarter and first three quarters of 2017 out of selling, general, and administrative expense and into Other expense. In December 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires amounts generally described as restricted cash and restricted cash equivalents to be included within cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statement of cash flows. The Company adopted the ASU in the first quarter of 2018, recasting the beginning-of-period and end-of-period total cash and cash equivalent amounts on the statement of cash flows to include the £10,000 restricted cash account for the pension plan at December 31, 2016, thus reducing cash flows from operating activities by $12,568 in 2017. The Company did not have any restricted cash at September 29, 2018 or December 30, 2017.

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