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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended
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Apr. 01, 2023
Accounting Policies [Abstract] |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | (1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Condensed Consolidated Financial Statements The Condensed Consolidated Balance Sheet at April 1, 2023, the Condensed Consolidated Statements of Earnings, Comprehensive Income, Cash Flows, and Shareholders’ Equity for the thirteen weeks ended April 1, 2023 and March 26, 2022 have been prepared by Valmont Industries, Inc. (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 at April 1, 2023 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 31, 2022. The results of operations for the period ended April 1, 2023 are not necessarily indicative of the operating results for the full year. Inventories Inventory is valued at the lower of cost, determined on the first-in, first-out method or net realizable value. 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. Inventories consisted of the following:
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | April 1, | ​ | December 31,
​ | ​ | 2023 |  | 2022
Raw materials and purchased parts | ​ | $ | 258,300 | ​ | $ | 258,814
Work-in-process | ​ |  | 46,250 | ​ |  | 44,453
Finished goods and manufactured goods | ​ |  | 420,810 | ​ |  | 425,495
​ | ​ | $ | 725,360 | ​ | $ | 728,762
​ Income Taxes Earnings before income taxes and equity in loss of nonconsolidated subsidiaries for the thirteen weeks ended April 1, 2023 and March 26, 2022 were as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Thirteen weeks ended
​ | ​ | 2023 |  | 2022
United States | ​ | $ | 31,858 | ​ | $ | 60,816
Foreign | ​ |  | 73,151 | ​ |  | 25,569
​ | ​ | $ | 105,009 | ​ | $ | 86,385
​ ​ (1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 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 weeks ended April 1, 2023 and March 26, 2022 were as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Thirteen weeks ended
​ | ​ | 2023 |  | 2022
Interest cost | ​ | $ | 5,256 | ​ | $ | 3,365
Expected return on plan assets | ​ |  | (5,317) | ​ |  | (6,202)
Amortization of prior service cost | ​ |  | 122 | ​ |  | 132
Net periodic (benefit) expense | ​ | $ | 61 | ​ | $ | (2,705)
​ 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 April 1, 2023, 1,647,157 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 date in equal amounts over three years or on the grant’s fifth anniversary date. Expiration of grants is seven years to ten years from the date of grant. Restricted stock units and awards generally vest in equal installments over three or four 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 weeks ended April 1, 2023 and March 26, 2022, respectively, were as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Thirteen weeks ended
​ | ​ | 2023 |  | 2022
Compensation expense | ​ | $ | 8,689 | ​ | $ | 9,463
Income tax benefits | ​ |  | 2,172 | ​ |  | 2,366
​ 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. (1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 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 majority of the Company’s trading securities represent the investments held in the Valmont Deferred Compensation Plan (the “DCP”). The assets of the DCP at April 1, 2023 of $28,452 ($25,008 at December 31, 2022) represent mutual funds, invested in debt and equity securities, classified as trading securities in accordance with Accounting Standards Codification 320, Accounting for Certain Investments in Debt and Equity Securities (“ASC 320”), considering the employee’s ability to change investment allocation of their deferred compensation at any time. Derivative Financial Instruments: The fair value of foreign currency and commodity forward contracts and cross currency contracts is based on a valuation model that discounts cash flows resulting from the differential between the contract price and the market-based forward rate. Mutual Funds: The Company has short-term investments in various mutual funds. Marketable Securities: The Company's marketable securities consist of short-term investments in certificates of deposit. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Fair Value Measurement Using:
​ | ​ | ​ |  | Quoted Prices in |  | Significant Other |  | Significant
​ | ​ | ​ | ​ | ​ | Active Markets | ​ | Observable | ​ | Unobservable
​ | ​ | Carrying Value | ​ | for Identical | ​ | Inputs | ​ | Inputs
​ | ​ | April 1, 2023 | ​ | Assets (Level 1) | ​ | (Level 2) | ​ | (Level 3)
Assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Trading securities | ​ | $ | 28,452 | ​ | $ | 28,452 | ​ | $ | — | ​ | $ | —
Derivative financial instruments, net | ​ | ​ | 2,793 | ​ | ​ | — | ​ | ​ | 2,793 | ​ | ​ | —
Cash and cash equivalents - mutual funds | ​ | ​ | 1,534 | ​ | ​ | 1,534 | ​ | ​ | — | ​ | ​ | —
Cash and cash equivalents - marketable securities | ​ | ​ | 142 | ​ | ​ | — | ​ | ​ | 142 | ​ | ​ | —
​ ​ (1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Fair Value Measurement Using:
​ | ​ | ​ |  | Quoted Prices in |  | Significant Other |  | Significant
​ | ​ | Carrying Value | ​ | Active Markets | ​ | Observable | ​ | Unobservable
​ | ​ | December 31, | ​ | for Identical | ​ | Inputs | ​ | Inputs
​ | ​ | 2022 | ​ | Assets (Level 1) | ​ | (Level 2) | ​ | (Level 3)
Assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Trading securities | ​ | $ | 25,008 | ​ | $ | 25,008 | ​ | $ | — | ​ | $ | —
Derivative financial instruments, net | ​ | ​ | 1,404 | ​ | ​ | — | ​ | ​ | 1,404 | ​ | ​ | —
Cash and cash equivalents - mutual funds | ​ | ​ | 7,205 | ​ | ​ | 7,205 | ​ | ​ | — | ​ | ​ | —
Cash and cash equivalents - marketable securities | ​ | ​ | 136 | ​ | ​ | — | ​ | ​ | 136 | ​ | ​ | —
​ 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. Leases The Company’s operating leases right-of-use assets and corresponding lease obligations are included in “Other assets” and “Operating lease liabilities”, respectively, in the Condensed Consolidated Balance Sheets. Comprehensive Income Comprehensive income includes net earnings, currency translation adjustments, certain derivative-related activity, and changes in prior service cost and 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 April 1, 2023 and December 31, 2022:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Foreign |  | ​ | ​ |  | ​ | ​ |  | Accumulated
​ | ​ | Currency | ​ | ​ | ​ | Defined | ​ | Other
​ | ​ | Translation | ​ | Hedging | ​ | Benefit | ​ | Comprehensive
​ | ​ | Adjustments | ​ | Activities | ​ | Pension Plan | ​ | Income (Loss)
Balance at December 31, 2022 | ​ | $ | (260,799) | ​ | $ | 20,099 | ​ | $ | (34,209) | ​ | $ | (274,909)
Current period comprehensive income | ​ |  | 7,896 | ​ |  | 789 | ​ |  | 91 | ​ |  | 8,776
Balance at April 1, 2023 | ​ | $ | (252,903) | ​ | $ | 20,888 | ​ | $ | (34,118) | ​ | $ | (266,133)
​ Revenue Recognition The Company determines the appropriate revenue recognition model 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 sales when the performance obligation is related to the manufacturing and sale of goods. Contract revenues are classified as service sales when the performance obligation is the performance of a service. Service revenue is primarily related to the coatings and technology products and services product lines. ​ (1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Customer acceptance provisions exist only in the design stage of our products (on a limited basis, the Company may agree to other acceptance terms), 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 this service as a separate performance obligation and, therefore, no revenue is recognized with the design stage. 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 transmission, distribution, and substation structures ("TD&S") product line, the solar product line, and the telecommunication structures product line, the Company’s inventory is interchangeable for a variety of each segment’s customers. The Company has elected 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 does 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’s contract assets at April 1, 2023 and December 31, 2022 totaled $159,785 and $174,539, respectively. While most of the Infrastructure segment customers are generally invoiced upon shipment or delivery of the goods to the customer’s specified location, certain customers are also invoiced by advanced billings or progress billings. At April 1, 2023 and December 31, 2022, total contract liabilities were $156,483 and $178,531, respectively. At April 1, 2023, $156,333 was recorded as “Contract liabilities” and $150 was recorded as “Other noncurrent liabilities” on the Condensed Consolidated Balance Sheets. Additional details are as follows:
| ● | During the thirteen weeks ended April 1, 2023, and March 26, 2022, the Company recognized $58,939 and $28,023 of revenue that was included in the total contract liability at December 31, 2022 and December 25, 2021, respectively. The revenue recognized was due to applying advance payments received for performance obligations completed during the period.
| ● | At April 1, 2023, the Company had $150 of remaining performance obligations on contracts with an original expected duration of one year or more and expects to complete the remaining performance obligations on these contracts within the next 12 to 24 months.
​ (1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Segment and Product Line Revenue Recognition Infrastructure Segment Steel and concrete utility structures within the TD&S product line 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 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 the TD&S and telecommunication structure product lines, the Company generally recognizes revenue on an input 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. Depending on the product sold, revenue from the solar product line is recognized both upon shipment or delivery of goods to the customer depending on contract terms, or by 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 TD&S sales and the Company has chosen to expense estimated commissions owed to third parties by recognizing them proportionately as the goods are manufactured. For the structures sold for lighting and transportation and for the majority of telecommunication products, 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. There are also large regional customers who have unique product specifications for telecommunication 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. The coatings product line 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. Agriculture Segment Revenue recognition from the manufacture of irrigation equipment and related parts and services (including tubular products for industrial customers) 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 recognized as part of technology services product line 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 “Business Segments & Related Revenue Information” footnote. ​ (1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Recently Adopted Accounting Pronouncements In September 2022, the FASB issued Accounting Standards Update No. 2022-04, Liabilities - Supplier Finance Programs (Topic 450-50): Disclosure of Supplier Finance Program Obligations (“ASU 2022-04”), which requires all buyers that use supplier finance programs to enhance the transparency of such programs to allow financial statement users to understand the effect on working capital, liquidity, and cash flows. The new guidance requires disclosure of key terms of the program, including a description of the payment terms, payment timing, and assets pledged as security or other forms of guarantees provided to the finance provider or intermediary. Other requirements include the disclosure of the amount that remains unpaid as of the end of the reporting period, a description of where these obligations are presented in the balance sheet, and a rollforward of the obligation during the annual period. The guidance is effective in the first quarter of 2023, except for the rollforward, which is effective in 2024. The Company adopted the new standard in the first quarter of 2023, as well as early adopted the amendment on rollforward information. The new guidance had no effect on the Company’s results of operations as the changes are primarily disclosure related, as shown below. During 2019, the Company entered into an agreement with a third-party financial institution to facilitate a supplier finance program which allows qualifying suppliers to sell their receivables from the Company to the financial institution. These participating suppliers negotiate their outstanding receivable arrangements directly with the financial institution and the Company’s rights and obligations to suppliers are not impacted. The Company has no economic interest in a supplier’s decision to enter into these agreements. Once a qualifying supplier elects to participate in the supplier finance program and reaches an agreement with a financial institution, they elect which individual Company invoices they sell to the financial institution. The Company’s obligation is to make payment in the invoice amount negotiated with participating suppliers to the financial institution on the invoice due date, regardless of whether the individual invoice is sold by the supplier to the financial institution. The financial institution pays the supplier on the invoice due date for any invoices that were not previously sold under the supplier finance program. The invoice amounts and scheduled payment terms are not impacted by the suppliers’ decisions to sell amounts under these arrangements. The payment of these obligations is included in cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows. Included in Accounts Payable in the Condensed Consolidated Balance Sheets at April 1, 2023 and December 31, 2022 were $58,134 and $48,880 of outstanding payment obligations, respectively, that were sold to the financial institution under the Company’s supplier finance program. ​
​ | ​ | ​ | ​
Confirmed obligations outstanding at December 31, 2022 | ​ | $ | 48,880
Invoices confirmed during the period | ​ | ​ | 74,781
Confirmed invoices paid during the period | ​ |  | (65,527)
Confirmed obligations outstanding at April 1, 2023 | ​ | $ | 58,134
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